We Think You Should Be Aware Of Some Concerning Factors In Far EasTone Telecommunications' (TWSE:4904) Earnings

Far EasTone Telecommunications Co., Ltd.'s (TWSE:4904) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

See our latest analysis for Far EasTone Telecommunications

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Far EasTone Telecommunications increased the number of shares on issue by 11% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a chart of Far EasTone Telecommunications' EPS by clicking here.

A Look At The Impact Of Far EasTone Telecommunications' Dilution On Its Earnings Per Share (EPS)

Far EasTone Telecommunications has improved its profit over the last three years, with an annualized gain of 33% in that time. In comparison, earnings per share only gained 23% over the same period. And in the last year the company managed to bump profit up by 10%. On the other hand, earnings per share are pretty much flat, over the last twelve months. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, earnings per share growth should beget share price growth. So Far EasTone Telecommunications shareholders will want to see that EPS figure continue to increase. 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 Far EasTone Telecommunications' Profit Performance

Far EasTone Telecommunications 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 Far EasTone Telecommunications' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 23% per annum growth in EPS for the last three. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Far EasTone Telecommunications as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 3 warning signs for Far EasTone Telecommunications and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Far EasTone Telecommunications' 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. 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.