Concerns Surrounding PMB Technology Berhad's (KLSE:PMBTECH) Performance

PMB Technology Berhad's (KLSE:PMBTECH ) stock didn't jump after it announced some healthy earnings. We think that investors might be worried about some concerning underlying factors.

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In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, PMB Technology Berhad issued 17% more new shares over the last year. That means its earnings are split among 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 PMB Technology Berhad's historical EPS growth by clicking on this link.

How Is Dilution Impacting PMB Technology Berhad's Earnings Per Share (EPS)?

PMB Technology Berhad's net profit dropped by 74% per year over the last three years. The good news is that profit was up 52% in the last twelve months. But EPS was less impressive, up only 37% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So PMB Technology Berhad shareholders will want to see that EPS figure continue to increase. 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 PMB Technology Berhad.

Our Take On PMB Technology Berhad's Profit Performance

PMB Technology Berhad shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that PMB Technology Berhad's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 37% EPS growth in 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. To help with this, we've discovered 3 warning signs (2 are a bit concerning!) that you ought to be aware of before buying any shares in PMB Technology Berhad.

Today we've zoomed in on a single data point to better understand the nature of PMB Technology Berhad's profit. But there are plenty of other ways to inform your opinion of a company. 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.