Despite Jutze Intelligence Technology Co.,Ltd's (SZSE:300802) recent earnings report having lackluster headline numbers, the market responded positively. 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.
One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Jutze Intelligence TechnologyLtd expanded the number of shares on issue by 11% over the last year. Therefore, each share now receives a smaller portion of profit. 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 Jutze Intelligence TechnologyLtd's EPS by clicking here.
How Is Dilution Impacting Jutze Intelligence TechnologyLtd's Earnings Per Share (EPS)?
Unfortunately, Jutze Intelligence TechnologyLtd's profit is down 4.5% per year over three years. Even looking at the last year, profit was still down 30%. Sadly, earnings per share fell further, down a full 48% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.
In the long term, if Jutze Intelligence TechnologyLtd's earnings per share can increase, then the share price should too. 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.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Jutze Intelligence TechnologyLtd.
Our Take On Jutze Intelligence TechnologyLtd's Profit Performance
Jutze Intelligence TechnologyLtd issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Jutze Intelligence TechnologyLtd's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Jutze Intelligence TechnologyLtd.
This note has only looked at a single factor that sheds light on the nature of Jutze Intelligence TechnologyLtd'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.