We Think That There Are More Issues For Kronologi Asia Berhad (KLSE:KRONO) Than Just Sluggish Earnings

A lackluster earnings announcement from Kronologi Asia Berhad (KLSE:KRONO) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Kronologi Asia Berhad

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Kronologi Asia Berhad issued 24% more new shares 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. Check out Kronologi Asia Berhad's historical EPS growth by clicking on this link.

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

As you can see above, Kronologi Asia Berhad has been growing its net income over the last few years, with an annualized gain of 527% over three years. But EPS was only up 340% per year, in the exact same period. Net income was down 66% over the last twelve months. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 68%. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

If Kronologi Asia 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.

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 Kronologi Asia Berhad's Profit Performance

Over the last year Kronologi Asia Berhad issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Kronologi Asia 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. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that Kronologi Asia Berhad has 3 warning signs and it would be unwise to ignore them.

Today we've zoomed in on a single data point to better understand the nature of Kronologi Asia 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 that insiders are buying.

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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.