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Investors were disappointed with Yoma Strategic Holdings Ltd.'s (SGX:Z59) recent earnings release. Our analysis found several concerning factors in the earnings report beyond the strong statutory profit number.
Check out our latest analysis for Yoma Strategic Holdings
To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Yoma Strategic Holdings issued 6.4% 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 Yoma Strategic Holdings' EPS by clicking here.
How Is Dilution Impacting Yoma Strategic Holdings' Earnings Per Share (EPS)?
Yoma Strategic Holdings was losing money three years ago. And even focusing only on the last twelve months, we don't have a meaningful growth rate because it made a loss a year ago, too. What we do know is that while it's great to see a profit over the last twelve months, that profit would have been better, on a per share basis, if the company hadn't needed to issue shares. Therefore, the dilution is having a noteworthy influence on shareholder returns.
If Yoma Strategic Holdings' 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 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 Yoma Strategic Holdings.
The Impact Of Unusual Items On Profit
Alongside that dilution, it's also important to note that Yoma Strategic Holdings' profit was boosted by unusual items worth US$39m in the last twelve months. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. Yoma Strategic Holdings had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.