We Think You Should Be Aware Of Some Concerning Factors In Nextgreen Global Berhad's (KLSE:NGGB) Earnings

Nextgreen Global Berhad's (KLSE:NGGB) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

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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. As it happens, Nextgreen Global Berhad issued 6.5% more new shares over the last year. 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. Check out Nextgreen Global Berhad's historical EPS growth by clicking on this link.

How Is Dilution Impacting Nextgreen Global Berhad's Earnings Per Share (EPS)?

Nextgreen Global Berhad has improved its profit over the last three years, with an annualized gain of 123% in that time. In comparison, earnings per share only gained 50% over the same period. And the 32% profit boost in the last year certainly seems impressive at first glance. But in comparison, EPS only increased by 12% 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 Nextgreen Global Berhad shareholders will want to see that EPS figure continue to increase. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 Nextgreen Global Berhad.

Our Take On Nextgreen Global Berhad's Profit Performance

Nextgreen Global 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 Nextgreen Global 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 50% 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. While earnings are important, another area to consider is the balance sheet. If you're interested we have a graphic representation of Nextgreen Global Berhad's balance sheet.

Today we've zoomed in on a single data point to better understand the nature of Nextgreen Global 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 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.