Techbond Group Berhad's (KLSE:TECHBND) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.
View our latest analysis for Techbond 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, Techbond Group Berhad issued 34% more new shares 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 Techbond Group Berhad's EPS by clicking here.
A Look At The Impact Of Techbond Group Berhad's Dilution On Its Earnings Per Share (EPS)
As you can see above, Techbond Group Berhad has been growing its net income over the last few years, with an annualized gain of 68% over three years. In comparison, earnings per share only gained 48% over the same period. And over the last 12 months, the company grew its profit by 11%. Meanwhile, EPS was flat over the same period. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.
If Techbond Group Berhad's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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.
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 Techbond Group Berhad's Profit Performance
As we discussed above, Techbond Group Berhad's dilution over the last year has a major impact on its per-share earnings. For this reason, we think that Techbond Group Berhad's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But at least holders can take some solace from the 48% per annum growth in EPS for the last three. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 3 warning signs for Techbond Group Berhad you should be mindful of and 1 of these can't be ignored.