Keppel Infrastructure Trust's (SGX:A7RU) Promising Earnings May Rest On Soft Foundations

Keppel Infrastructure Trust's (SGX:A7RU) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

View our latest analysis for Keppel Infrastructure Trust

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Keppel Infrastructure Trust increased the number of shares on issue by 13% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. 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 Keppel Infrastructure Trust's EPS by clicking here.

How Is Dilution Impacting Keppel Infrastructure Trust's Earnings Per Share (EPS)?

Keppel Infrastructure Trust has improved its profit over the last three years, with an annualized gain of 75% in that time. But EPS was only up 61% per year, in the exact same period. And the 11,049% profit boost in the last year certainly seems impressive at first glance. But in comparison, EPS only increased by 10,239% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, earnings per share growth should beget share price growth. So Keppel Infrastructure Trust shareholders will want to see that EPS figure continue to increase. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 Keppel Infrastructure Trust's Profit Performance

Each Keppel Infrastructure Trust share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Keppel Infrastructure Trust's true underlying earnings power is actually less than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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'd like to know more about Keppel Infrastructure Trust as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for Keppel Infrastructure Trust you should be mindful of and 2 of these are significant.

Today we've zoomed in on a single data point to better understand the nature of Keppel Infrastructure Trust's 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. 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.