DPS Resources Berhad's (KLSE:DPS) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.
See our latest analysis for DPS Resources Berhad
One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, DPS Resources Berhad issued 75% more new shares over the last year. As a result, its net income is now split between a greater number of shares. 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. You can see a chart of DPS Resources Berhad's EPS by clicking here.
A Look At The Impact Of DPS Resources Berhad's Dilution On Its Earnings Per Share (EPS)
Unfortunately, DPS Resources Berhad's profit is down 45% per year over three years. On the bright side, in the last twelve months it grew profit by 106%. But earnings per share are actually down 15%, over that same period. This is a great example of why it's rather imprudent to rely only on net income as a growth measure. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.
If DPS Resources 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 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 DPS Resources Berhad.
Our Take On DPS Resources Berhad's Profit Performance
DPS Resources Berhad shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. For this reason, we think that DPS Resources 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. Sadly, its EPS was down over the last twelve months. 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. Our analysis shows 2 warning signs for DPS Resources Berhad (1 is significant!) and we strongly recommend you look at these before investing.