Gabungan AQRS Berhad's (KLSE:GBGAQRS) stock was strong after they reported robust earnings. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.
In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, Gabungan AQRS Berhad issued 10.0% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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 Gabungan AQRS Berhad's historical EPS growth by clicking on this link.
How Is Dilution Impacting Gabungan AQRS Berhad's Earnings Per Share? (EPS)
As it happens, we don't know how much the company made or lost three years ago, because we don't have the data. 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. What we do know is that while it's great to see a profit over the last twelve months, that profit would have been better, on a per share basis, if the company hadn't needed to issue shares. And so, you can see quite clearly that dilution is influencing shareholder earnings.
If Gabungan AQRS Berhad's 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.
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 Gabungan AQRS Berhad's Profit Performance
Gabungan AQRS 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 Gabungan AQRS Berhad's statutory profits are better than its underlying earnings power. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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. If you'd like to know more about Gabungan AQRS Berhad as a business, it's important to be aware of any risks it's facing. For instance, we've identified 4 warning signs for Gabungan AQRS Berhad (1 is a bit unpleasant) you should be familiar with.
Today we've zoomed in on a single data point to better understand the nature of Gabungan AQRS Berhad's profit. 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 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.
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