ES Ceramics Technology Berhad's (KLSE:ESCERAM) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Despite ES Ceramics Technology Berhad's (KLSE:ESCERAM) recent earnings report having lackluster headline numbers, the market responded positively. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for ES Ceramics Technology Berhad.

Check out our latest analysis for ES Ceramics Technology 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, ES Ceramics Technology Berhad increased the number of shares on issue by 27% over the last twelve months by issuing new shares. That means its earnings are split among a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. You can see a chart of ES Ceramics Technology Berhad's EPS by clicking here.

How Is Dilution Impacting ES Ceramics Technology Berhad's Earnings Per Share (EPS)?

ES Ceramics Technology Berhad has improved its profit over the last three years, with an annualized gain of 242% in that time. In comparison, earnings per share only gained 151% over the same period. Net profit actually dropped by 21% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 31%. So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, if ES Ceramics Technology Berhad'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 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 ES Ceramics Technology Berhad.

Our Take On ES Ceramics Technology Berhad's Profit Performance

ES Ceramics Technology 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 ES Ceramics Technology Berhad's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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 ES Ceramics Technology Berhad as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 3 warning signs for ES Ceramics Technology Berhad and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of ES Ceramics Technology Berhad'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 that insiders are buying.

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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.