The market rallied behind Yongjin Technology Group Co., Ltd.'s (SHSE:603995) stock, leading do a rise in the share price after its recent weak earnings report. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, Yongjin Technology Group issued 8.5% more new shares over the last year. As a result, its net income is now split between 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 Yongjin Technology Group's historical EPS growth by clicking on this link.

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

As you can see above, Yongjin Technology Group has been growing its net income over the last few years, with an annualized gain of 9.3% over three years. But on the other hand, earnings per share actually fell by 0.9% per year. Net income was down 6.9% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 15%. So you can see that the dilution has had a bit of an impact on shareholders.

If Yongjin Technology Group's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 Yongjin Technology Group's Profit Performance

Over the last year Yongjin Technology Group issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Yongjin Technology Group's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. 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 2 warning signs for Yongjin Technology Group and we think they deserve your attention.

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