Investors Shouldn't Be Too Comfortable With Inta Bina Group Berhad's (KLSE:INTA) Earnings

Inta Bina Group Berhad's (KLSE:INTA) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

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In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Inta Bina Group Berhad increased the number of shares on issue by 11% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. 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. Check out Inta Bina Group Berhad's historical EPS growth by clicking on this link.

How Is Dilution Impacting Inta Bina Group Berhad's Earnings Per Share (EPS)?

Inta Bina Group Berhad has improved its profit over the last three years, with an annualized gain of 275% in that time. But EPS was only up 251% per year, in the exact same period. And the 26% profit boost in the last year certainly seems impressive at first glance. On the other hand, earnings per share are only up 20% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if Inta Bina Group Berhad can grow EPS persistently. 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.

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 Inta Bina Group Berhad's Profit Performance

Inta Bina Group Berhad shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that Inta Bina Group Berhad's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 2 warning signs for Inta Bina Group Berhad and you'll want to know about these.

Today we've zoomed in on a single data point to better understand the nature of Inta Bina Group 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. 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.