Marine & General Berhad's (KLSE:M&G) Problems Go Beyond Poor Profit

The recent earnings release from Marine & General Berhad (KLSE:M&G ) was disappointing to investors. We looked deeper and believe that there is even more to be worried about, beyond the soft profit numbers.

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Marine & General Berhad issued 7.9% more new shares over the last year. 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 Marine & General Berhad's historical EPS growth by clicking on this link.

How Is Dilution Impacting Marine & General Berhad's Earnings Per Share (EPS)?

Marine & General Berhad was losing money three years ago. And even focusing only on the last twelve months, we see profit is down 26%. Sadly, earnings per share fell further, down a full 26% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

If Marine & General Berhad's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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 Marine & General Berhad.

How Do Unusual Items Influence Profit?

Alongside that dilution, it's also important to note that Marine & General Berhad's profit was boosted by unusual items worth RM44m in the last twelve months. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Marine & General Berhad's positive unusual items were quite significant relative to its profit in the year to January 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On Marine & General Berhad's Profit Performance

To sum it all up, Marine & General Berhad got a nice boost to profit from unusual items; without that, its statutory results would have looked worse. And furthermore, it went and issued plenty of new shares, ensuring that each shareholder (who did not tip more money in) now owns a smaller proportion of the company. Considering all this we'd argue Marine & General Berhad's profits probably give an overly generous impression of its sustainable level of profitability. If you'd like to know more about Marine & General Berhad as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for Marine & General Berhad you should be mindful of and 1 of these bad boys shouldn't be ignored.

In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. 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. 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 with significant insider holdings to be useful.

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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.