A lackluster earnings announcement from Shanxi Coking Coal Energy Group Co., Ltd. (SZSE:000983) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Shanxi Coking Coal Energy Group increased the number of shares on issue by 9.1% 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 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 Shanxi Coking Coal Energy Group's EPS by clicking here.

How Is Dilution Impacting Shanxi Coking Coal Energy Group's Earnings Per Share (EPS)?

As you can see above, Shanxi Coking Coal Energy Group has been growing its net income over the last few years, with an annualized gain of 133% over three years. In comparison, earnings per share only gained 69% over the same period. Net income was down 50% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 54%. So you can see that the dilution has had a bit of an impact on shareholders.

If Shanxi Coking Coal Energy Group'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 Shanxi Coking Coal Energy Group's Profit Performance

Over the last year Shanxi Coking Coal Energy Group 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 Shanxi Coking Coal Energy Group's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 69% over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Shanxi Coking Coal Energy Group has 3 warning signs and it would be unwise to ignore them.

Today we've zoomed in on a single data point to better understand the nature of Shanxi Coking Coal Energy 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.