PGF Capital Berhad's (KLSE:PGF) Sluggish Earnings Might Be Just The Beginning Of Its Problems

A lackluster earnings announcement from PGF Capital Berhad (KLSE:PGF) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

View our latest analysis for PGF Capital Berhad

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, PGF Capital Berhad issued 19% more new shares over the last year. As a result, its net income is now split between 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. Check out PGF Capital Berhad's historical EPS growth by clicking on this link.

How Is Dilution Impacting PGF Capital Berhad's Earnings Per Share (EPS)?

PGF Capital Berhad has improved its profit over the last three years, with an annualized gain of 35% in that time. Net income was down 13% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 14%. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if PGF Capital Berhad's earnings per share can increase, then the share price should too. 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 PGF Capital Berhad's Profit Performance

Over the last year PGF Capital Berhad issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that PGF Capital Berhad's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 31% over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of PGF Capital Berhad.

Today we've zoomed in on a single data point to better understand the nature of PGF Capital 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.

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