PTT Synergy Group Berhad (KLSE:PTT) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.
See our latest analysis for PTT Synergy Group Berhad
To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, PTT Synergy Group Berhad issued 20% more new shares over the last year. That means its earnings are split among a greater number of shares. 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 PTT Synergy Group Berhad's EPS by clicking here.
How Is Dilution Impacting PTT Synergy Group Berhad's Earnings Per Share (EPS)?
PTT Synergy Group Berhad was losing money three years ago. On the bright side, in the last twelve months it grew profit by 1,193%. On the other hand, earnings per share are only up 595% over the same period. So you can see that the dilution has had a bit of an impact on shareholders.
Changes in the share price do tend to reflect changes in earnings per share, in the long run. So PTT Synergy Group Berhad 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.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of PTT Synergy Group Berhad.
Our Take On PTT Synergy Group Berhad's Profit Performance
PTT Synergy Group Berhad shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that PTT Synergy Group Berhad'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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To help with this, we've discovered 2 warning signs (1 is concerning!) that you ought to be aware of before buying any shares in PTT Synergy Group Berhad.