The recent earnings posted by Greatview Aseptic Packaging Company Limited (HKG:468) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.
In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Greatview Aseptic Packaging expanded the number of shares on issue by 5.3% over the last year. That means its earnings are split among 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 Greatview Aseptic Packaging's historical EPS growth by clicking on this link.
A Look At The Impact Of Greatview Aseptic Packaging's Dilution On Its Earnings Per Share (EPS)
Unfortunately, Greatview Aseptic Packaging's profit is down 29% per year over three years. The good news is that profit was up 34% in the last twelve months. On the other hand, earnings per share are only up 34% over the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.
In the long term, earnings per share growth should beget share price growth. So Greatview Aseptic Packaging 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 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 Greatview Aseptic Packaging's Profit Performance
Each Greatview Aseptic Packaging 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 Greatview Aseptic Packaging's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 34% in the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Greatview Aseptic Packaging has 1 warning sign we think you should be aware of.
This note has only looked at a single factor that sheds light on the nature of Greatview Aseptic Packaging's 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.