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CSE Global Limited's (SGX:544) stock was strong after they recently reported robust earnings. However, we think that shareholders may be missing some concerning details in the numbers.
See our latest analysis for CSE Global
To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, CSE Global increased the number of shares on issue by 13% over the last twelve months by issuing new shares. 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. Check out CSE Global's historical EPS growth by clicking on this link.
How Is Dilution Impacting CSE Global's Earnings Per Share (EPS)?
CSE Global has improved its profit over the last three years, with an annualized gain of 15% in that time. In contrast, earnings per share were actually down by 6.6% per year, in the exact same period. And at a glance the 136% gain in profit over the last year impresses. But in comparison, EPS only increased by 118% over the same period. So you can see that the dilution has had a bit of an impact on shareholders.
In the long term, earnings per share growth should beget share price growth. So CSE Global 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.
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.
Our Take On CSE Global's Profit Performance
Each CSE Global share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that CSE Global's statutory profits are better than its underlying earnings power. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that CSE Global has 2 warning signs and it would be unwise to ignore these.