Lintes Technology's (TWSE:6715) Weak Earnings May Only Reveal A Part Of The Whole Picture

Lintes Technology Co., Ltd.'s (TWSE:6715) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for Lintes Technology

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Lintes Technology expanded the number of shares on issue by 5.9% 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. You can see a chart of Lintes Technology's EPS by clicking here.

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

As you can see above, Lintes Technology has been growing its net income over the last few years, with an annualized gain of 80% over three years. In comparison, earnings per share only gained 60% over the same period. Net income was down 21% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 24%. So you can see that the dilution has had a bit of an impact on shareholders.

If Lintes Technology'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.

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 Lintes Technology's Profit Performance

Over the last year Lintes Technology issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Lintes Technology's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 60% over the last three years. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 2 warning signs with Lintes Technology, and understanding them should be part of your investment process.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.