Carlo Rino Group Berhad's (KLSE:CARLORINO) Problems Go Beyond Weak Profit

The market wasn't impressed with the soft earnings from Carlo Rino Group Berhad (KLSE:CARLORINO) recently. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

View our latest analysis for Carlo Rino Group Berhad

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Carlo Rino Group Berhad increased the number of shares on issue by 21% over the last twelve months by issuing new shares. 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 Carlo Rino Group Berhad's historical EPS growth by clicking on this link.

A Look At The Impact Of Carlo Rino Group Berhad's Dilution On Its Earnings Per Share (EPS)

As you can see above, Carlo Rino Group Berhad has been growing its net income over the last few years, with an annualized gain of 257% over three years. Net profit actually dropped by 14% in the last year. But the EPS result was even worse, with the company recording a decline of 14%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if Carlo Rino Group Berhad's earnings per share can increase, then the share price should too. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 Carlo Rino Group Berhad.

Our Take On Carlo Rino Group Berhad's Profit Performance

Over the last year Carlo Rino Group Berhad issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Carlo Rino Group Berhad's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. So while earnings quality is important, it's equally important to consider the risks facing Carlo Rino Group Berhad at this point in time. Case in point: We've spotted 3 warning signs for Carlo Rino Group Berhad you should be mindful of and 1 of them is significant.

This note has only looked at a single factor that sheds light on the nature of Carlo Rino Group Berhad's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.