Why Ibraco Berhad's (KLSE:IBRACO) Shaky Earnings Are Just The Beginning Of Its Problems

Ibraco Berhad's (KLSE:IBRACO) stock rose after its recent weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Ibraco Berhad.

Check out our latest analysis for Ibraco Berhad

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Ibraco Berhad expanded the number of shares on issue by 10.0% 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. You can see a chart of Ibraco Berhad's EPS by clicking here.

A Look At The Impact Of Ibraco Berhad's Dilution on Its Earnings Per Share (EPS).

As you can see above, Ibraco Berhad has been growing its net income over the last few years, with an annualized gain of 28% over three years. Net income was down 33% over the last twelve months. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 33%. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if Ibraco Berhad'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 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.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Ibraco Berhad's Profit Performance

Over the last year Ibraco Berhad issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that Ibraco Berhad's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 28% per annum growth in EPS for the last three. 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 Ibraco Berhad, you'd also look into what risks it is currently facing. For instance, we've identified 4 warning signs for Ibraco Berhad (1 is concerning) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Ibraco 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 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.