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We Think You Should Be Aware Of Some Concerning Factors In China New Higher Education Group's (HKG:2001) Earnings

Simply Wall St · 4d ago

The recent earnings posted by China New Higher Education Group Limited (HKG:2001) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

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earnings-and-revenue-history
SEHK:2001 Earnings and Revenue History January 6th 2026

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, China New Higher Education Group issued 28% more new shares over the last year. As a result, its net income is now split between a greater number of shares. 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. You can see a chart of China New Higher Education Group's EPS by clicking here.

A Look At The Impact Of China New Higher Education Group's Dilution On Its Earnings Per Share (EPS)

China New Higher Education Group has improved its profit over the last three years, with an annualized gain of 34% in that time. And in the last year the company managed to bump profit up by 9.7%. Meanwhile, EPS was flat over the same period. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if China New Higher Education Group can grow EPS persistently. 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.

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 China New Higher Education Group's Profit Performance

China New Higher Education Group shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that China New Higher Education Group's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 25% over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that China New Higher Education Group has 1 warning sign and it would be unwise to ignore it.

This note has only looked at a single factor that sheds light on the nature of China New Higher Education 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 with high insider ownership.