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

The stock price didn't jump after Leader Steel Holdings Berhad (KLSE:LSTEEL) posted decent earnings last week. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

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 15% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. 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 Leader Steel Holdings Berhad's EPS by clicking here.

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

As you can see above, Leader Steel Holdings Berhad has been growing its net income over the last few years, with an annualized gain of 14% over three years. In comparison, earnings per share only gained 2.2% over the same period. And the 351% profit boost in the last year certainly seems impressive at first glance. On the other hand, earnings per share are only up 309% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if Leader Steel Holdings Berhad can grow EPS persistently. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. 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.

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

Leader Steel Holdings Berhad shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that Leader Steel Holdings Berhad's true underlying earnings power is actually less than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Leader Steel Holdings Berhad has 3 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand 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. 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. 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.