Earnings Troubles May Signal Larger Issues for Ping Ho Environmental Technology (TWSE:6771) Shareholders

A lackluster earnings announcement from Ping Ho Environmental Technology Co., Ltd. (TWSE:6771) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

See our latest analysis for Ping Ho Environmental Technology

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Ping Ho Environmental Technology issued 6.9% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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. Check out Ping Ho Environmental Technology's historical EPS growth by clicking on this link.

How Is Dilution Impacting Ping Ho Environmental Technology's Earnings Per Share (EPS)?

Unfortunately, Ping Ho Environmental Technology's profit is down 8.7% per year over three years. Even looking at the last year, profit was still down 8.2%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 11% in the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

If Ping Ho Environmental 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 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.

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 Ping Ho Environmental Technology's Profit Performance

Over the last year Ping Ho Environmental Technology 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 Ping Ho Environmental Technology's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. 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 Ping Ho Environmental Technology and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Ping Ho Environmental Technology's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.