Does Macroblock's (GTSM:3527) Statutory Profit Adequately Reflect Its Underlying Profit?

As a general rule, we think profitable companies are less risky than companies that lose money. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Macroblock's (GTSM:3527) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Macroblock made a profit of NT$73.5m on revenue of NT$2.00b. Below, you can see that both its revenue and its profit have fallen over the last three years.

View our latest analysis for Macroblock

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. In this article we will consider how Macroblock's decision to issue new shares in the company has impacted returns to shareholders. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Macroblock.

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Macroblock issued 8.5% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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. You can see a chart of Macroblock's EPS by clicking here.

How Is Dilution Impacting Macroblock's Earnings Per Share? (EPS)

Unfortunately, Macroblock's profit is down 43% per year over three years. And even focusing only on the last twelve months, we see profit is down 70%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 71% in the same period. So you can see that the dilution has had a bit of an impact on shareholders. Therefore, the dilution is having a noteworthy influence on shareholder returns. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Macroblock's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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.

Our Take On Macroblock's Profit Performance

Over the last year Macroblock issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that Macroblock's statutory profits are better than its underlying earnings power. 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. If you want to do dive deeper into Macroblock, you'd also look into what risks it is currently facing. Case in point: We've spotted 3 warning signs for Macroblock you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Macroblock's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.

If you’re looking to trade Macroblock, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.