TANH

The market shrugged off Tantech Holdings Ltd's (NASDAQ:TANH) weak earnings report. While shares were up, we believe there are some factors in the earnings report that might cause investors some concerns. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Tantech Holdings increased the number of shares on issue by 2,843% over the last twelve months by issuing new shares. That means its earnings are split among 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. Check out Tantech Holdings' historical EPS growth by clicking on this link. As you can see above, Tantech Holdings has been growing its net income over the last few years, with an annualized gain of 1,644% over three years. But on the other hand, earnings per share actually fell by 79% per year. Net profit actually dropped by 27% in the last year. But the EPS result was even worse, with the company recording a decline of 92%. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders. If Tantech Holdings' EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tantech Holdings. Finally, we should also consider the fact that unusual items boosted Tantech Holdings' net profit by US$3.5m over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Tantech Holdings' positive unusual items were quite significant relative to its profit in the year to June 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be. In its last report Tantech Holdings benefitted from unusual items which boosted its profit, which could make the profit seem better than it really is on a sustainable basis. And furthermore, it went and issued plenty of new shares, ensuring that each shareholder (who did not tip more money in) now owns a smaller proportion of the company. For all the reasons mentioned above, we think that, at a glance, Tantech Holdings' statutory profits could be considered to be low quality, because they are likely to give investors an overly positive impression of the company. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 4 warning signs for Tantech Holdings (2 are a bit unpleasant!) and we strongly recommend you look at them before investing. Our examination of Tantech Holdings has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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. 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. 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.