Mermaid Maritime's (SGX:DU4) Earnings Might Not Be As Promising As They Seem

Mermaid Maritime Public Company Limited (SGX:DU4) posted some decent earnings, but shareholders didn't react strongly. Our analysis suggests they may be concerned about some underlying details.

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To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Mermaid Maritime issued 34% 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. Check out Mermaid Maritime's historical EPS growth by clicking on this link.

A Look At The Impact Of Mermaid Maritime's Dilution On Its Earnings Per Share (EPS)

Mermaid Maritime was losing money three years ago. On the bright side, in the last twelve months it grew profit by 10%. But EPS was less impressive, and was pretty much flat over that time. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Mermaid Maritime 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.

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

How Do Unusual Items Influence Profit?

Alongside that dilution, it's also important to note that Mermaid Maritime's profit was boosted by unusual items worth ฿337m in the last twelve months. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Mermaid Maritime's positive unusual items were quite significant relative to its profit in the year to September 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On Mermaid Maritime's Profit Performance

In its last report Mermaid Maritime benefitted from unusual items which boosted its profit, which could make the profit seem better than it really is on a sustainable basis. And furthermore, it went and issued plenty of new shares, ensuring that each shareholder (who did not tip more money in) now owns a smaller proportion of the company. For the reasons mentioned above, we think that a perfunctory glance at Mermaid Maritime's statutory profits might make it look better than it really is on an underlying level. So while earnings quality is important, it's equally important to consider the risks facing Mermaid Maritime at this point in time. For instance, we've identified 2 warning signs for Mermaid Maritime (1 is potentially serious) you should be familiar with.

Our examination of Mermaid Maritime has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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 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.