Zhejiang Great Shengda Packaging Co.,Ltd.'s (SHSE:603687) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Zhejiang Great Shengda PackagingLtd increased the number of shares on issue by 31% over the last twelve months by issuing new shares. That means its earnings are split among 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 Zhejiang Great Shengda PackagingLtd's historical EPS growth by clicking on this link.

How Is Dilution Impacting Zhejiang Great Shengda PackagingLtd's Earnings Per Share (EPS)?

Unfortunately, Zhejiang Great Shengda PackagingLtd's profit is down 69% per year over three years. And even focusing only on the last twelve months, we see profit is down 14%. Sadly, earnings per share fell further, down a full 27% in that time. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

In the long term, if Zhejiang Great Shengda PackagingLtd'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 the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zhejiang Great Shengda PackagingLtd.

Our Take On Zhejiang Great Shengda PackagingLtd's Profit Performance

Zhejiang Great Shengda PackagingLtd issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Zhejiang Great Shengda PackagingLtd's true underlying earnings power is actually less than its statutory profit. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Zhejiang Great Shengda PackagingLtd has 2 warning signs (1 is a bit concerning!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Great Shengda PackagingLtd'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.