Add New Energy Investment Holdings Group Limited's (HKG:2623) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Add New Energy Investment Holdings Group expanded the number of shares on issue by 33% 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 Add New Energy Investment Holdings Group's historical EPS growth by clicking on this link.

A Look At The Impact Of Add New Energy Investment Holdings Group's Dilution On Its Earnings Per Share (EPS)

As it happens, we don't know how much the company made or lost three years ago, because we don't have the data. Even looking at the last year, profit was still down 12%. Sadly, earnings per share fell further, down a full 25% in that time. So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, if Add New Energy Investment Holdings Group's earnings per share can increase, then the share price should too. 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Add New Energy Investment Holdings Group.

Our Take On Add New Energy Investment Holdings Group's Profit Performance

Over the last year Add New Energy Investment Holdings Group issued new shares and so, there's a noteworthy divergence between EPS and net income growth. For this reason, we think that Add New Energy Investment Holdings Group's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into Add New Energy Investment Holdings Group, you'd also look into what risks it is currently facing. At Simply Wall St, we found 2 warning signs for Add New Energy Investment Holdings Group and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Add New Energy Investment Holdings Group's profit. But there are plenty of other ways to inform your opinion of a company. 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.