Oriental Interest Berhad's (KLSE:OIB) Shareholders May Want To Dig Deeper Than Statutory Profit

The recent earnings posted by Oriental Interest Berhad (KLSE:OIB) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

We've discovered 1 warning sign about Oriental Interest Berhad. View them for free.

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Oriental Interest Berhad increased the number of shares on issue by 25% over the last twelve months by issuing new shares. 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 Oriental Interest Berhad's EPS by clicking here.

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

Oriental Interest Berhad has improved its profit over the last three years, with an annualized gain of 95% in that time. And at a glance the 21% gain in profit over the last year impresses. On the other hand, earnings per share are only up 21% in that time. So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if Oriental Interest 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 Oriental Interest Berhad.

Our Take On Oriental Interest Berhad's Profit Performance

Each Oriental Interest Berhad share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that Oriental Interest Berhad's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you want to do dive deeper into Oriental Interest Berhad, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Oriental Interest Berhad and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of Oriental Interest 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.