Last week's earnings announcement from Carlo Rino Group Berhad (KLSE:CARLORINO) was disappointing to investors, with a sluggish profit figure. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.
See our latest analysis for Carlo Rino 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, Carlo Rino Group Berhad issued 21% more new shares over the last year. As a result, its net income is now split between a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. You can see a chart of Carlo Rino Group Berhad's EPS by clicking here.
Carlo Rino Group Berhad has improved its profit over the last three years, with an annualized gain of 257% in that time. Net profit actually dropped by 14% in the last year. But the EPS result was even worse, with the company recording a decline of 14%. So you can see that the dilution has had a bit of an impact on shareholders.
If Carlo Rino Group 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 Carlo Rino Group Berhad.
Carlo Rino Group Berhad issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Carlo Rino Group Berhad's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've found that Carlo Rino Group Berhad has 3 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.