Guanghui Logistics Co.Ltd's (SHSE:600603) 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, Guanghui LogisticsLtd increased the number of shares on issue by 33% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. Check out Guanghui LogisticsLtd's historical EPS growth by clicking on this link.

A Look At The Impact Of Guanghui LogisticsLtd's Dilution On Its Earnings Per Share (EPS)

Guanghui LogisticsLtd's net profit dropped by 26% per year over the last three years. Even looking at the last year, profit was still down 5.2%. Sadly, earnings per share fell further, down a full 3.8% 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 Guanghui LogisticsLtd'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 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 Guanghui LogisticsLtd's Profit Performance

Over the last year Guanghui LogisticsLtd issued new shares and so, there's a noteworthy divergence between EPS and net income growth. For this reason, we think that Guanghui LogisticsLtd'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'd like to know more about Guanghui LogisticsLtd as a business, it's important to be aware of any risks it's facing. Be aware that Guanghui LogisticsLtd is showing 2 warning signs in our investment analysis and 1 of those is a bit concerning...

Today we've zoomed in on a single data point to better understand the nature of Guanghui LogisticsLtd's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.