Travelite Holdings' (SGX:BCZ) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Travelite Holdings Ltd.'s (SGX:BCZ) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Travelite Holdings

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Travelite Holdings increased the number of shares on issue by 50% over the last twelve months by issuing new shares. As a result, its net income is now split between 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. You can see a chart of Travelite Holdings' EPS by clicking here.

A Look At The Impact Of Travelite Holdings' Dilution On Its Earnings Per Share (EPS)

Three years ago, Travelite Holdings lost money. Even looking at the last year, profit was still down 12%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 12% in the same period. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

In the long term, if Travelite Holdings' earnings per share can increase, then the share price should too. 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Travelite Holdings.

Our Take On Travelite Holdings' Profit Performance

Travelite Holdings issued shares during the year, and that means its EPS performance lags its net income growth. As a result, we think it may well be the case that Travelite Holdings' underlying earnings power is lower 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 3 warning signs we've spotted with Travelite Holdings (including 2 which are potentially serious).

Today we've zoomed in on a single data point to better understand the nature of Travelite Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.