We Think That There Are Issues Underlying Harn Len Corporation Bhd's (KLSE:HARNLEN) Earnings

Despite posting some strong earnings, the market for Harn Len Corporation Bhd's (KLSE:HARNLEN) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

We've discovered 2 warning signs about Harn Len Corporation Bhd. View them for free.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Harn Len Corporation Bhd expanded the number of shares on issue by 8.4% over the last year. That means its earnings are split among a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a chart of Harn Len Corporation Bhd's EPS by clicking here.

A Look At The Impact Of Harn Len Corporation Bhd's Dilution On Its Earnings Per Share (EPS)

Three years ago, Harn Len Corporation Bhd lost money. 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). Therefore, the dilution is having a noteworthy influence on shareholder returns.

If Harn Len Corporation Bhd's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 Harn Len Corporation Bhd.

Our Take On Harn Len Corporation Bhd's Profit Performance

Harn Len Corporation Bhd issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that Harn Len Corporation Bhd's statutory profits are better than its underlying earnings power. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. If you want to do dive deeper into Harn Len Corporation Bhd, you'd also look into what risks it is currently facing. At Simply Wall St, we found 2 warning signs for Harn Len Corporation Bhd and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Harn Len Corporation Bhd'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. 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.