We Think You Should Be Aware Of Some Concerning Factors In Awanbiru Technology Berhad's (KLSE:AWANTEC) Earnings

The market for Awanbiru Technology Berhad's (KLSE:AWANTEC) stock was strong after it released a healthy earnings report last week. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

View our latest analysis for Awanbiru Technology Berhad

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Awanbiru Technology Berhad increased the number of shares on issue by 63% over the last twelve months by issuing new shares. 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 Awanbiru Technology Berhad's historical EPS growth by clicking on this link.

How Is Dilution Impacting Awanbiru Technology Berhad's Earnings Per Share? (EPS)

Awanbiru Technology Berhad was losing money three years ago. Zooming in to the last year, we still can't talk about growth rates coherently, since it made a loss last year. 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 Awanbiru Technology 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.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Awanbiru Technology Berhad's Profit Performance

Over the last year Awanbiru Technology Berhad issued new shares and so, there's a noteworthy divergence between EPS and net income growth. For this reason, we think that Awanbiru Technology Berhad's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 2 warning signs for Awanbiru Technology Berhad (1 is concerning!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Awanbiru Technology 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 that insiders are buying.

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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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