I-Chiun Precision Industry's (TWSE:2486) Sluggish Earnings Might Be Just The Beginning Of Its Problems

I-Chiun Precision Industry Co., Ltd.'s (TWSE:2486) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for I-Chiun Precision Industry

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, I-Chiun Precision Industry issued 6.2% more new shares over the last year. That means its earnings are split among a greater number of shares. 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 I-Chiun Precision Industry's historical EPS growth by clicking on this link.

How Is Dilution Impacting I-Chiun Precision Industry's Earnings Per Share (EPS)?

I-Chiun Precision Industry's net profit dropped by 77% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 53%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 55% in the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

If I-Chiun Precision Industry's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of I-Chiun Precision Industry.

Our Take On I-Chiun Precision Industry's Profit Performance

Over the last year I-Chiun Precision Industry issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that I-Chiun Precision Industry's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 3 warning signs for I-Chiun Precision Industry and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of I-Chiun Precision Industry's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.