We Think That There Are More Issues For Ancom Nylex Berhad (KLSE:ANCOMNY) Than Just Sluggish Earnings

Ancom Nylex Berhad's (KLSE:ANCOMNY) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

Check out our latest analysis for Ancom Nylex Berhad

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Ancom Nylex Berhad issued 16% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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. You can see a chart of Ancom Nylex Berhad's EPS by clicking here.

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

As you can see above, Ancom Nylex Berhad has been growing its net income over the last few years, with an annualized gain of 148% over three years. In comparison, earnings per share only gained 89% over the same period. Net profit actually dropped by 2.7% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 6.3%. So you can see that the dilution has had a bit of an impact on shareholders.

If Ancom Nylex 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 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 Ancom Nylex Berhad's Profit Performance

Ancom Nylex Berhad issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Ancom Nylex Berhad's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Ancom Nylex Berhad at this point in time. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Ancom Nylex Berhad.

This note has only looked at a single factor that sheds light on the nature of Ancom Nylex Berhad's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.