Malaysia Steel Works (KL) Bhd's (KLSE:MASTEEL) Earnings Are Of Questionable Quality

Malaysia Steel Works (KL) Bhd.'s (KLSE:MASTEEL) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for Malaysia Steel Works (KL) Bhd

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Malaysia Steel Works (KL) Bhd increased the number of shares on issue by 51% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. 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. Check out Malaysia Steel Works (KL) Bhd's historical EPS growth by clicking on this link.

A Look At The Impact Of Malaysia Steel Works (KL) Bhd's Dilution on Its 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. But mathematics aside, it is always good to see when a formerly unprofitable business come good (though we accept profit would have been higher if dilution had not been required). So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, if Malaysia Steel Works (KL) Bhd'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 Malaysia Steel Works (KL) Bhd.

Our Take On Malaysia Steel Works (KL) Bhd's Profit Performance

Over the last year Malaysia Steel Works (KL) Bhd issued new shares and so, there's a noteworthy divergence between EPS and net income growth. For this reason, we think that Malaysia Steel Works (KL) Bhd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 5 warning signs we've spotted with Malaysia Steel Works (KL) Bhd (including 3 which are a bit concerning).

Today we've zoomed in on a single data point to better understand the nature of Malaysia Steel Works (KL) Bhd'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 that insiders are buying 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.