Earnings Troubles May Signal Larger Issues for Metro Healthcare Berhad (KLSE:METRO) Shareholders

Metro Healthcare Berhad's (KLSE:METRO) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Metro Healthcare Berhad

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Metro Healthcare Berhad increased the number of shares on issue by 19% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. 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. You can see a chart of Metro Healthcare Berhad's EPS by clicking here.

A Look At The Impact Of Metro Healthcare Berhad's Dilution On Its Earnings Per Share (EPS)

Unfortunately, Metro Healthcare Berhad's profit is down 52% per year over three years. Even looking at the last year, profit was still down 27%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 12% in the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Metro Healthcare Berhad'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 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 Metro Healthcare Berhad's Profit Performance

Over the last year Metro Healthcare 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 Metro Healthcare Berhad's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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 while earnings quality is important, it's equally important to consider the risks facing Metro Healthcare Berhad at this point in time. In terms of investment risks, we've identified 4 warning signs with Metro Healthcare Berhad, and understanding them should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Metro Healthcare 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.