Weak Statutory Earnings May Not Tell The Whole Story For Seacera Group Berhad (KLSE:SEACERA)

A lackluster earnings announcement from Seacera Group Berhad (KLSE:SEACERA) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Seacera Group Berhad

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Seacera Group Berhad increased the number of shares on issue by 25% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. 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. You can see a chart of Seacera Group Berhad's EPS by clicking here.

A Look At The Impact Of Seacera Group Berhad's Dilution on Its Earnings Per Share (EPS).

Seacera Group Berhad was losing money three years ago. Even looking at the last year, profit was still down 39%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 39% in the same period. So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, if Seacera Group 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 the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Seacera Group Berhad.

Our Take On Seacera Group Berhad's Profit Performance

Seacera Group 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 Seacera Group Berhad's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 4 warning signs for Seacera Group Berhad you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Seacera Group 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. 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 that insiders are buying to be useful.

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 (at) simplywallst.com.