We Think That There Are More Issues For GE-Shen Corporation Berhad (KLSE:GESHEN) Than Just Sluggish Earnings

A lackluster earnings announcement from GE-Shen Corporation Berhad (KLSE:GESHEN) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for GE-Shen Corporation Berhad

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, GE-Shen Corporation Berhad issued 11% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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 GE-Shen Corporation Berhad's EPS by clicking here.

How Is Dilution Impacting GE-Shen Corporation Berhad's Earnings Per Share (EPS)?

Three years ago, GE-Shen Corporation Berhad lost money. Even looking at the last year, profit was still down 52%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 52% in the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if GE-Shen Corporation 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of GE-Shen Corporation Berhad.

Our Take On GE-Shen Corporation Berhad's Profit Performance

Over the last year GE-Shen Corporation Berhad issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that GE-Shen Corporation Berhad's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that GE-Shen Corporation Berhad is showing 4 warning signs in our investment analysis and 1 of those is significant...

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

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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.