SynPower's (TWSE:6658) Sluggish Earnings Might Be Just The Beginning Of Its Problems

SynPower Co., Ltd.'s (TWSE:6658) stock showed strength, with investors undeterred by its weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

Check out our latest analysis for SynPower

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, SynPower increased the number of shares on issue by 9.5% over the last twelve months by issuing new shares. That means its earnings are split among a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. Check out SynPower's historical EPS growth by clicking on this link.

How Is Dilution Impacting SynPower's Earnings Per Share (EPS)?

SynPower's net profit dropped by 26% per year over the last three years. Even looking at the last year, profit was still down 54%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 57% in the same period. So you can see that the dilution has had a bit of an impact on shareholders.

If SynPower'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 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 SynPower.

Our Take On SynPower's Profit Performance

Over the last year SynPower 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 SynPower's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've found that SynPower has 4 warning signs (1 shouldn't be ignored!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of SynPower'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. 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.