Ni Hsin Resources Berhad's (KLSE:NIHSIN) Profits Appear To Have Quality Issues

Ni Hsin Resources Berhad's (KLSE:NIHSIN) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

Check out our latest analysis for Ni Hsin Resources Berhad

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Ni Hsin Resources Berhad expanded the number of shares on issue by 38% over the last year. That means its earnings are split among 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 Ni Hsin Resources Berhad's historical EPS growth by clicking on this link.

A Look At The Impact Of Ni Hsin Resources Berhad's Dilution on Its Earnings Per Share (EPS).

Unfortunately, we don't have any visibility into its profits three years back, because we lack 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). So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, if Ni Hsin Resources 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 Ni Hsin Resources Berhad.

Our Take On Ni Hsin Resources Berhad's Profit Performance

Over the last year Ni Hsin Resources Berhad issued new shares and so, there's a noteworthy divergence between EPS and net income growth. As a result, we think it may well be the case that Ni Hsin Resources Berhad's underlying earnings power is lower than its statutory profit. 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. If you want to do dive deeper into Ni Hsin Resources Berhad, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 3 warning signs for Ni Hsin Resources Berhad and you'll want to know about these.

Today we've zoomed in on a single data point to better understand the nature of Ni Hsin Resources Berhad's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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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