Radiant Globaltech Berhad's (KLSE:RGTECH) Solid Earnings Are Supported By Other Strong Factors

When companies post strong earnings, the stock generally performs well, just like Radiant Globaltech Berhad's (KLSE:RGTECH) stock has recently. Our analysis found some more factors that we think are good for shareholders.

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A Closer Look At Radiant Globaltech Berhad's Earnings

Many investors haven't heard of the accrual ratio from cashflow, but it is actually a useful measure of how well a company's profit is backed up by free cash flow (FCF) during a given period. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. This ratio tells us how much of a company's profit is not backed by free cashflow.

As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. That is not intended to imply we should worry about a positive accrual ratio, but it's worth noting where the accrual ratio is rather high. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.

Over the twelve months to September 2025, Radiant Globaltech Berhad recorded an accrual ratio of -0.38. That indicates that its free cash flow quite significantly exceeded its statutory profit. Indeed, in the last twelve months it reported free cash flow of RM34m, well over the RM9.68m it reported in profit. Radiant Globaltech Berhad shareholders are no doubt pleased that free cash flow improved over the last twelve months. Notably, the company has issued new shares, thus diluting existing shareholders and reducing their share of future earnings.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Radiant Globaltech Berhad.

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, Radiant Globaltech Berhad issued 5.8% more new shares over the last year. That means its earnings are split among a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. Check out Radiant Globaltech Berhad's historical EPS growth by clicking on this link.

How Is Dilution Impacting Radiant Globaltech Berhad's Earnings Per Share (EPS)?

As you can see above, Radiant Globaltech Berhad has been growing its net income over the last few years, with an annualized gain of 10.0% over three years. And the 46% profit boost in the last year certainly seems impressive at first glance. But in comparison, EPS only increased by 40% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Radiant Globaltech Berhad shareholders will want to see that EPS figure continue to increase. 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.

Our Take On Radiant Globaltech Berhad's Profit Performance

In conclusion, Radiant Globaltech Berhad has strong cashflow relative to earnings, which indicates good quality earnings, but the dilution means its earnings per share growth is weaker than its profit growth. Based on these factors, we think that Radiant Globaltech Berhad's profits are a reasonably conservative guide to its underlying profitability. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 1 warning sign for Radiant Globaltech Berhad and you'll want to know about it.

Our examination of Radiant Globaltech Berhad has focussed on certain factors that can make its earnings look better than they are. 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.