Summit Ascent Holdings' (HKG:102) Anemic Earnings Might Be Worse Than You Think

A lackluster earnings announcement from Summit Ascent Holdings Limited (HKG:102) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

See our latest analysis for Summit Ascent Holdings

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Summit Ascent Holdings issued 150% more new shares over the last year. As a result, its net income is now split between a greater number of shares. 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. Check out Summit Ascent Holdings' historical EPS growth by clicking on this link.

A Look At The Impact Of Summit Ascent Holdings' Dilution on Its Earnings Per Share (EPS).

Summit Ascent Holdings' net profit dropped by 28% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 88%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 92% in the same period. So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, if Summit Ascent Holdings' 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 Summit Ascent Holdings' Profit Performance

Over the last year Summit Ascent Holdings issued new shares and so, there's a noteworthy divergence between EPS and net income growth. As a result, we think it may well be the case that Summit Ascent Holdings' underlying earnings power is lower 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. When we did our research, we found 3 warning signs for Summit Ascent Holdings (1 is significant!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Summit Ascent Holdings' 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. 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.

If you’re looking to trade Summit Ascent Holdings, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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