Zhongyu Energy Holdings Limited's (HKG:3633) 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.

View our latest analysis for Zhongyu Energy Holdings

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Zhongyu Energy Holdings issued 7.1% more new shares over the last year. As a result, its net income is now split between a greater number of shares. 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. Check out Zhongyu Energy Holdings' historical EPS growth by clicking on this link.

How Is Dilution Impacting Zhongyu Energy Holdings' Earnings Per Share? (EPS)

As you can see above, Zhongyu Energy Holdings has been growing its net income over the last few years, with an annualized gain of 91% over three years. In comparison, earnings per share only gained 80% over the same period. And in the last year the company managed to bump profit up by 13%. But in comparison, EPS only increased by 11% 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 Zhongyu Energy Holdings 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.

Our data indicates that Zhongyu Energy Holdings insiders have been buying shares! If you are like me, that'll make you wonder who exactly bought... and what price they paid! Soclick here to find out (using our intuitive visualisation of insider trading).

Our Take On Zhongyu Energy Holdings' Profit Performance

Each Zhongyu Energy Holdings share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that Zhongyu Energy Holdings' statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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 Zhongyu Energy Holdings as a business, it's important to be aware of any risks it's facing. Be aware that Zhongyu Energy Holdings is showing 2 warning signs in our investment analysis and 1 of those is concerning...

Today we've zoomed in on a single data point to better understand the nature of Zhongyu Energy Holdings' 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 that insiders are buying.

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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.