We're Not So Sure You Should Rely on Asian Pay Television Trust's (SGX:S7OU) Statutory Earnings

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding Asian Pay Television Trust (SGX:S7OU).

It's good to see that over the last twelve months Asian Pay Television Trust made a profit of S$14.8m on revenue of S$305.1m. Below, you can see that both its revenue and its profit have fallen over the last three years.

See our latest analysis for Asian Pay Television Trust

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. In this article we will consider how Asian Pay Television Trust's decision to issue new shares in the company has impacted returns to shareholders. 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.

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Asian Pay Television Trust increased the number of shares on issue by 25% 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. Check out Asian Pay Television Trust's historical EPS growth by clicking on this link.

A Look At The Impact Of Asian Pay Television Trust's Dilution on Its Earnings Per Share (EPS).

Unfortunately, Asian Pay Television Trust's profit is down 64% per year over three years. The good news is that profit was up 24% in the last twelve months. On the other hand, earnings per share are only up 15% over the same period. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Asian Pay Television 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 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.

Our Take On Asian Pay Television Trust's Profit Performance

Asian Pay Television Trust shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that Asian Pay Television Trust's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 15% EPS growth in the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, Asian Pay Television Trust has 3 warning signs (and 1 which can't be ignored) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Asian Pay Television Trust's profit. 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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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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