Syncmold Enterprise's (TWSE:1582) Promising Earnings May Rest On Soft Foundations

Last week's profit announcement from Syncmold Enterprise Corp. (TWSE:1582) was underwhelming for investors, despite headline numbers being robust. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

Check out our latest analysis for Syncmold Enterprise

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Syncmold Enterprise issued 16% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. Check out Syncmold Enterprise's historical EPS growth by clicking on this link.

A Look At The Impact Of Syncmold Enterprise's Dilution On Its Earnings Per Share (EPS)

Syncmold Enterprise has improved its profit over the last three years, with an annualized gain of 126% in that time. In comparison, earnings per share only gained 100% over the same period. And the 100% profit boost in the last year certainly seems impressive at first glance. But in comparison, EPS only increased by 77% over the same period. So you can see that the dilution has had a bit of an impact on shareholders.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Syncmold Enterprise shareholders will want to see that EPS figure continue to increase. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Syncmold Enterprise's Profit Performance

Syncmold Enterprise shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that Syncmold Enterprise's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Syncmold Enterprise at this point in time. For example, we've found that Syncmold Enterprise has 3 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Syncmold Enterprise's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.