Tex Cycle Technology (M) Berhad's (KLSE:TEXCYCL) Sluggish Earnings Might Be Just The Beginning Of Its Problems

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

See our latest analysis for Tex Cycle Technology (M) Berhad

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, Tex Cycle Technology (M) Berhad issued 11% 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 Tex Cycle Technology (M) Berhad's historical EPS growth by clicking on this link.

How Is Dilution Impacting Tex Cycle Technology (M) Berhad's Earnings Per Share (EPS)?

Tex Cycle Technology (M) Berhad has improved its profit over the last three years, with an annualized gain of 144% in that time. In comparison, earnings per share only gained 122% over the same period. However, net income was pretty flat over the last year with a miniscule decrease. Meanwhile, EPS was actually down a full 11% over the period, highlighting just how different the profits look from a per-share perspective. So you can see that the dilution has had a bit of an impact on shareholders.

If Tex Cycle Technology (M) Berhad's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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 Tex Cycle Technology (M) Berhad.

Our Take On Tex Cycle Technology (M) Berhad's Profit Performance

Over the last year Tex Cycle Technology (M) Berhad issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Tex Cycle Technology (M) 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. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Tex Cycle Technology (M) Berhad as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Tex Cycle Technology (M) Berhad and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Tex Cycle Technology (M) 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.