Tanco Holdings Berhad's (KLSE:TANCO) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The subdued market reaction suggests that Tanco Holdings Berhad's (KLSE:TANCO) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

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In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Tanco Holdings Berhad expanded the number of shares on issue by 12% over the last year. That means its earnings are split among a greater number of shares. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. You can see a chart of Tanco Holdings Berhad's EPS by clicking here.

How Is Dilution Impacting Tanco Holdings Berhad's Earnings Per Share (EPS)?

Three years ago, Tanco Holdings Berhad lost money. And even focusing only on the last twelve months, we see profit is down 34%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 54% in the same period. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if Tanco Holdings 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 Tanco Holdings Berhad.

Our Take On Tanco Holdings Berhad's Profit Performance

Tanco Holdings 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 Tanco Holdings Berhad's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the 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. While it's very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. If you're interested we have a graphic representation of Tanco Holdings Berhad's balance sheet.

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