We Think You Should Be Aware Of Some Concerning Factors In Leader Steel Holdings Berhad's (KLSE:LSTEEL) Earnings

The recent earnings posted by Leader Steel Holdings Berhad (KLSE:LSTEEL) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

See our latest analysis for Leader Steel Holdings 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, Leader Steel Holdings Berhad increased the number of shares on issue by 20% over the last twelve months by issuing new shares. 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 Leader Steel Holdings Berhad's EPS by clicking here.

How Is Dilution Impacting Leader Steel Holdings Berhad's Earnings Per Share? (EPS)

We don't have any data on the company's profits from three years ago. 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. What we do know is that while it's great to see a profit over the last twelve months, that profit would have been better, on a per share basis, if the company hadn't needed to issue shares. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if Leader Steel Holdings Berhad's earnings per share can increase, then the share price should too. 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 Leader Steel Holdings Berhad.

Our Take On Leader Steel Holdings Berhad's Profit Performance

Over the last year Leader Steel Holdings Berhad issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Leader Steel Holdings Berhad's true underlying earnings power is actually less than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. If you'd like to know more about Leader Steel Holdings Berhad as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Leader Steel Holdings Berhad has 4 warning signs and it would be unwise to ignore these.

This note has only looked at a single factor that sheds light on the nature of Leader Steel Holdings 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. 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. 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.
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