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Unsurprisingly, Soilbuild Construction Group Ltd.'s (SGX:V5Q) stock price was strong on the back of its healthy earnings report. However, we think that shareholders may be missing some concerning details in the numbers.
See our latest analysis for Soilbuild Construction Group
In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Soilbuild Construction Group expanded the number of shares on issue by 12% 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 Soilbuild Construction Group's EPS by clicking here.
A Look At The Impact Of Soilbuild Construction Group's Dilution On Its Earnings Per Share (EPS)
Three years ago, Soilbuild Construction Group lost money. The good news is that profit was up 263% in the last twelve months. On the other hand, earnings per share are only up 208% over the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.
In the long term, earnings per share growth should beget share price growth. So Soilbuild Construction Group shareholders will want to see that EPS figure continue to increase. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Soilbuild Construction Group.
How Do Unusual Items Influence Profit?
On top of the dilution, we should also consider the S$4.3m impact of unusual items in the last year, which had the effect of suppressing profit. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Soilbuild Construction Group to produce a higher profit next year, all else being equal.
Our Take On Soilbuild Construction Group's Profit Performance
To sum it all up, Soilbuild Construction Group took a hit from unusual items which pushed its profit down; without that, it would have made more money. But on the other hand, the company issued more shares, so without buying more shares each shareholder will end up with a smaller part of the profit. Given the contrasting considerations, we don't have a strong view as to whether Soilbuild Construction Group's profits are an apt reflection of its underlying potential for profit. 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 - Soilbuild Construction Group has 1 warning sign we think you should be aware of.