Additional Considerations Required While Assessing Samaiden Group Berhad's (KLSE:SAMAIDEN) Strong Earnings

Last week's profit announcement from Samaiden Group Berhad (KLSE:SAMAIDEN) was underwhelming for investors, despite headline numbers being robust. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

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One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Samaiden Group Berhad increased the number of shares on issue by 7.1% over the last twelve months by issuing new shares. As a result, its net income is now split between 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 Samaiden Group Berhad's EPS by clicking here.

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

As you can see above, Samaiden Group Berhad has been growing its net income over the last few years, with an annualized gain of 85% over three years. But EPS was only up 67% per year, in the exact same period. And the 42% profit boost in the last year certainly seems impressive at first glance. But in comparison, EPS only increased by 34% over the same period. So you can see that the dilution has had a bit of an impact on shareholders.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Samaiden Group Berhad shareholders will want to see that EPS figure continue to increase. 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 Samaiden Group Berhad's Profit Performance

Each Samaiden Group Berhad share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Samaiden Group 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 67% over the last three years. 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. Obviously, we love to consider the historical data to inform our opinion of a company. But it can be really valuable to consider what other analysts are forecasting. So feel free to check out our free graph representing analyst forecasts.

Today we've zoomed in on a single data point to better understand the nature of Samaiden Group Berhad's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.