Earnings Troubles May Signal Larger Issues for Kerjaya Prospek Property Berhad (KLSE:KPPROP) Shareholders

Last week's earnings announcement from Kerjaya Prospek Property Berhad (KLSE:KPPROP) was disappointing to investors, with a sluggish profit figure. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

See our latest analysis for Kerjaya Prospek Property Berhad

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Kerjaya Prospek Property Berhad increased the number of shares on issue by 49% 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. Check out Kerjaya Prospek Property Berhad's historical EPS growth by clicking on this link.

How Is Dilution Impacting Kerjaya Prospek Property Berhad's Earnings Per Share (EPS)?

As you can see above, Kerjaya Prospek Property Berhad has been growing its net income over the last few years, with an annualized gain of 10.0% over three years. In contrast, earnings per share were actually down by 33% per year, in the exact same period. Net income was down 15% over the last twelve months. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 24%. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

If Kerjaya Prospek Property Berhad's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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 Kerjaya Prospek Property Berhad.

Our Take On Kerjaya Prospek Property Berhad's Profit Performance

Kerjaya Prospek Property Berhad issued shares during the year, and that means its EPS performance lags its net income growth. For this reason, we think that Kerjaya Prospek Property Berhad's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into Kerjaya Prospek Property Berhad, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Kerjaya Prospek Property Berhad has 3 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 Kerjaya Prospek Property 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.