Binasat Communications Berhad's (KLSE:BINACOM) Earnings Are Weaker Than They Seem

Binasat Communications Berhad (KLSE:BINACOM) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for Binasat Communications Berhad

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Binasat Communications Berhad expanded the number of shares on issue by 36% over the last year. Therefore, each share now receives a smaller portion of profit. 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 Binasat Communications Berhad's EPS by clicking here.

How Is Dilution Impacting Binasat Communications Berhad's Earnings Per Share (EPS)?

You can see above that Binasat Communications Berhad's profit is about the same as it was three years back. Meanwhile EPS has dropped 24% per year over the same time frame. The 102% increase in profit would have impressed many. Then again, EPS was only up 65% over that period. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

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

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

Our Take On Binasat Communications Berhad's Profit Performance

As we discussed above, Binasat Communications Berhad's dilution over the last year has a major impact on its per-share earnings. As a result, we think it may well be the case that Binasat Communications Berhad's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 65% EPS growth in the last year. 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'd like to know more about Binasat Communications Berhad as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for Binasat Communications Berhad (1 makes us a bit uncomfortable) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Binasat Communications Berhad's profit. But there are plenty of other ways to inform your opinion of a company. 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 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.