Bintai Kinden Corporation Berhad's (KLSE:BINTAI) Profits Appear To Have Quality Issues

The recent earnings posted by Bintai Kinden Corporation Berhad (KLSE:BINTAI) 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.

View our latest analysis for Bintai Kinden Corporation Berhad

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Bintai Kinden Corporation Berhad increased the number of shares on issue by 30% 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. You can see a chart of Bintai Kinden Corporation Berhad's EPS by clicking here.

How Is Dilution Impacting Bintai Kinden Corporation Berhad's Earnings Per Share (EPS)?

Bintai Kinden Corporation Berhad was losing money three years ago. And even focusing only on the last twelve months, we don't have a meaningful growth rate because it made a loss a year ago, too. But mathematics aside, it is always good to see when a formerly unprofitable business come good (though we accept profit would have been higher if dilution had not been required). Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

If Bintai Kinden Corporation Berhad's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Bintai Kinden Corporation Berhad.

Our Take On Bintai Kinden Corporation Berhad's Profit Performance

Bintai Kinden Corporation Berhad issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that Bintai Kinden Corporation Berhad's statutory profits are better than its underlying earnings power. The good news is that it earned a profit in the last twelve months, despite its previous loss. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into Bintai Kinden Corporation Berhad, you'd also look into what risks it is currently facing. Be aware that Bintai Kinden Corporation Berhad is showing 4 warning signs in our investment analysis and 2 of those are a bit unpleasant...

This note has only looked at a single factor that sheds light on the nature of Bintai Kinden Corporation Berhad'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. 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 with significant insider holdings to be useful.

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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.