Investors were disappointed with T7 Global Berhad's (KLSE:T7GLOBAL) earnings, despite the strong profit numbers. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.
To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. T7 Global Berhad expanded the number of shares on issue by 8.8% 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 T7 Global Berhad's historical EPS growth by clicking on this link.
How Is Dilution Impacting T7 Global Berhad's Earnings Per Share (EPS)?
As you can see above, T7 Global Berhad has been growing its net income over the last few years, with an annualized gain of 293% over three years. But EPS was only up 222% per year, in the exact same period. And over the last 12 months, the company grew its profit by 16%. On the other hand, earnings per share are pretty much flat, over the last twelve months. Therefore, the dilution is having a noteworthy influence on shareholder returns.
In the long term, if T7 Global 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.
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 T7 Global Berhad's Profit Performance
Each T7 Global Berhad share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that T7 Global Berhad's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. For instance, we've identified 2 warning signs for T7 Global Berhad (1 is a bit concerning) you should be familiar with.
Today we've zoomed in on a single data point to better understand the nature of T7 Global 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.
Valuation is complex, but we're here to simplify it.
Discover if T7 Global Berhad might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.