Global Palm Resources Holdings' (SGX:BLW) Promising Earnings May Rest On Soft Foundations

Global Palm Resources Holdings Limited (SGX:BLW) just reported some strong earnings, and the market rewarded them with a positive share price move. However, our analysis suggests that shareholders may be missing some factors that indicate the earnings result was not as good as it looked.

View our latest analysis for Global Palm Resources Holdings

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, Global Palm Resources Holdings issued 28% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a chart of Global Palm Resources Holdings' EPS by clicking here.

How Is Dilution Impacting Global Palm Resources Holdings' Earnings Per Share? (EPS)

As it happens, we don't know how much the company made or lost three years ago, because we don't have the data. And even focusing only on the last twelve months, we don't have a meaningful growth rate because it made a loss a year ago, too. What we do know is that while it's great to see a profit over the last twelve months, that profit would have been better, on a per share basis, if the company hadn't needed to issue shares. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

In the long term, if Global Palm Resources 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 Global Palm Resources Holdings.

Our Take On Global Palm Resources Holdings' Profit Performance

Global Palm Resources Holdings issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that Global Palm Resources Holdings' statutory profits are better than its underlying earnings power. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Global Palm Resources Holdings as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 4 warning signs (1 is potentially serious!) that you ought to be aware of before buying any shares in Global Palm Resources Holdings.

This note has only looked at a single factor that sheds light on the nature of Global Palm Resources 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 that insiders are buying.

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.

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