Earnings Troubles May Signal Larger Issues for Supreme Consolidated Resources Berhad (KLSE:SUPREME) Shareholders

The subdued market reaction suggests that Supreme Consolidated Resources Berhad's (KLSE:SUPREME) 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. In fact, Supreme Consolidated Resources Berhad increased the number of shares on issue by 19% over the last twelve months by issuing new shares. 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. Check out Supreme Consolidated Resources Berhad's historical EPS growth by clicking on this link.

A Look At The Impact Of Supreme Consolidated Resources Berhad's Dilution On Its Earnings Per Share (EPS)

Supreme Consolidated Resources Berhad has improved its profit over the last three years, with an annualized gain of 22% in that time. But on the other hand, earnings per share actually fell by 2.2% per year. Net income was down 7.7% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 22%. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if Supreme Consolidated 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 that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Supreme Consolidated Resources Berhad.

Our Take On Supreme Consolidated Resources Berhad's Profit Performance

Over the last year Supreme Consolidated Resources Berhad issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that Supreme Consolidated Resources Berhad's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Supreme Consolidated Resources Berhad.

This note has only looked at a single factor that sheds light on the nature of Supreme Consolidated Resources Berhad's profit. But there are plenty of other ways to inform your opinion of a company. 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.