We Think You Should Be Aware Of Some Concerning Factors In Weikeng Industrial's (TWSE:3033) Earnings

Weikeng Industrial Co., Ltd.'s (TWSE:3033) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for Weikeng Industrial

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Weikeng Industrial increased the number of shares on issue by 8.0% over the last twelve months by issuing new shares. 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. You can see a chart of Weikeng Industrial's EPS by clicking here.

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

Unfortunately, Weikeng Industrial's profit is down 23% per year over three years. The good news is that profit was up 32% in the last twelve months. On the other hand, earnings per share are only up 29% over the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So it will certainly be a positive for shareholders if Weikeng Industrial can grow EPS persistently. 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Weikeng Industrial.

Our Take On Weikeng Industrial's Profit Performance

Weikeng Industrial shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that Weikeng Industrial's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 29% EPS growth in the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Weikeng Industrial as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Weikeng Industrial (including 1 which is concerning).

Today we've zoomed in on a single data point to better understand the nature of Weikeng Industrial's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.