We Think That There Are Some Issues For Carlo Rino Group Berhad (KLSE:CARLORINO) Beyond Its Promising Earnings
Carlo Rino Group Berhad's (KLSE:CARLORINO) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.
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One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Carlo Rino Group Berhad increased the number of shares on issue by 21% 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 Carlo Rino Group Berhad's EPS by clicking here.
As you can see above, Carlo Rino Group Berhad has been growing its net income over the last few years, with an annualized gain of 46% over three years. While we did see a very small decrease, net profit was basically flat over the last year. In contrast, earnings per share are actually down a full 6.9%, over the last twelve months. Therefore, the dilution is having a noteworthy influence on shareholder returns.
If Carlo Rino Group Berhad'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.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Carlo Rino Group Berhad.
Over the last year Carlo Rino Group Berhad 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 Carlo Rino Group Berhad's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 38% per annum growth in EPS for the last three. 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. So while earnings quality is important, it's equally important to consider the risks facing Carlo Rino Group Berhad at this point in time. Case in point: We've spotted 2 warning signs for Carlo Rino Group Berhad you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of Carlo Rino Group Berhad'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 with significant insider holdings to be useful.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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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