SKB Shutters Corporation Berhad's (KLSE:SKBSHUT) Profits Appear To Have Quality Issues

SKB Shutters Corporation Berhad's (KLSE:SKBSHUT) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for SKB Shutters Corporation Berhad

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. SKB Shutters Corporation Berhad expanded the number of shares on issue by 10.0% 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 SKB Shutters Corporation Berhad's historical EPS growth by clicking on this link.

A Look At The Impact Of SKB Shutters Corporation Berhad's Dilution on Its 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. But mathematics aside, it is always good to see when a formerly unprofitable business come good (though we accept profit would have been higher if dilution had not been required). And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if SKB Shutters Corporation 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 SKB Shutters Corporation Berhad.

Our Take On SKB Shutters Corporation Berhad's Profit Performance

SKB Shutters Corporation 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 SKB Shutters Corporation 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. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - SKB Shutters Corporation Berhad has 4 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of SKB Shutters Corporation 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.

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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