YTL Power International Berhad's (KLSE:YTLPOWR) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Last week's earnings announcement from YTL Power International Berhad (KLSE:YTLPOWR) was disappointing to investors, with a sluggish profit figure. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

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One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, YTL Power International Berhad increased the number of shares on issue by 5.1% over the last twelve months by issuing new shares. As a result, its net income is now split between 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 YTL Power International Berhad's EPS by clicking here.

How Is Dilution Impacting YTL Power International Berhad's Earnings Per Share (EPS)?

As you can see above, YTL Power International Berhad has been growing its net income over the last few years, with an annualized gain of 59% over three years. Net income was down 15% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 17%. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if YTL Power International Berhad's earnings per share can increase, then the share price should too. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. 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 YTL Power International Berhad's Profit Performance

Over the last year YTL Power International Berhad issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that YTL Power International Berhad's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 56% per annum growth in EPS for the last three. 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. If you want to do dive deeper into YTL Power International Berhad, you'd also look into what risks it is currently facing. To help with this, we've discovered 2 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in YTL Power International Berhad.

Today we've zoomed in on a single data point to better understand the nature of YTL Power International 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. 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 with significant insider holdings 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.