Earnings Troubles May Signal Larger Issues for NCT Alliance Berhad (KLSE:NCT) Shareholders

The subdued market reaction suggests that NCT Alliance Berhad's (KLSE:NCT) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

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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, NCT Alliance Berhad issued 16% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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 NCT Alliance Berhad's EPS by clicking here.

A Look At The Impact Of NCT Alliance Berhad's Dilution On Its Earnings Per Share (EPS)

Unfortunately, NCT Alliance Berhad's profit is down 51% per year over three years. Even looking at the last year, profit was still down 51%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 65% in the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

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

Our Take On NCT Alliance Berhad's Profit Performance

NCT Alliance Berhad issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that NCT Alliance Berhad's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased 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. If you want to do dive deeper into NCT Alliance Berhad, you'd also look into what risks it is currently facing. For example - NCT Alliance Berhad has 2 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 NCT Alliance Berhad's profit. But there are plenty of other ways to inform your opinion of a company. 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.