Solid Earnings May Not Tell The Whole Story For Solarvest Holdings Berhad (KLSE:SLVEST)

Following the solid earnings report from Solarvest Holdings Berhad (KLSE:SLVEST), the market responded by bidding up the stock price. While the profit numbers were good, our analysis has found some concerning factors that shareholders should be aware of.

Check out our latest analysis for Solarvest Holdings Berhad

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Solarvest Holdings Berhad issued 5.7% more new shares over the last year. 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. Check out Solarvest Holdings Berhad's historical EPS growth by clicking on this link.

A Look At The Impact Of Solarvest Holdings Berhad's Dilution On Its Earnings Per Share (EPS)

Solarvest Holdings Berhad has improved its profit over the last three years, with an annualized gain of 118% in that time. But EPS was only up 100% per year, in the exact same period. And at a glance the 53% gain in profit over the last year impresses. On the other hand, earnings per share are only up 52% in that time. 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 Solarvest Holdings 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 Solarvest Holdings Berhad's Profit Performance

Solarvest Holdings 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 Solarvest Holdings Berhad's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate 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. If you want to do dive deeper into Solarvest Holdings Berhad, you'd also look into what risks it is currently facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Solarvest Holdings Berhad.

This note has only looked at a single factor that sheds light on the nature of Solarvest Holdings 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.