Swift Haulage Berhad (KLSE:SWIFT) Strong Profits May Be Masking Some Underlying Issues

Swift Haulage Berhad's (KLSE:SWIFT) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

See our latest analysis for Swift Haulage Berhad

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Swift Haulage Berhad issued 20% more new shares over the last year. That means its earnings are split among a greater number of shares. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. You can see a chart of Swift Haulage Berhad's EPS by clicking here.

How Is Dilution Impacting Swift Haulage Berhad's Earnings Per Share (EPS)?

As you can see above, Swift Haulage Berhad has been growing its net income over the last few years, with an annualized gain of 39% over three years. In contrast, earnings per share were actually down by 32% per year, in the exact same period. And in the last year the company managed to bump profit up by 7.1%. But that's starkly different from the 23% drop in earnings per share. So you can see that the dilution has had a bit of an impact on shareholders.

If Swift Haulage 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 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 Swift Haulage Berhad's Profit Performance

Swift Haulage Berhad shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that Swift Haulage Berhad's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 4 warning signs with Swift Haulage Berhad, and understanding them should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Swift Haulage 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. 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.