Kerjaya Prospek Property Berhad (KLSE:KPPROP) Strong Profits May Be Masking Some Underlying Issues

Kerjaya Prospek Property Berhad’s (KLSE:KPPROP) 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.

Check out our latest analysis for Kerjaya Prospek Property Berhad

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Kerjaya Prospek Property Berhad expanded the number of shares on issue by 49% over the last year. That means its earnings are split among 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 Kerjaya Prospek Property Berhad’s EPS by clicking here.

A Look At The Impact Of Kerjaya Prospek Property Berhad’s Dilution On Its Earnings Per Share (EPS)

Kerjaya Prospek Property Berhad has improved its profit over the last three years, with an annualized gain of 48% in that time. In contrast, earnings per share were actually down by 21% per year, in the exact same period. However, net income was pretty flat over the last year with a miniscule increase. Earnings per share are pretty much flat, too over the last twelve months, but EPS growth came in below below net income growth. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if Kerjaya Prospek Property Berhad can grow EPS persistently. 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 Kerjaya Prospek Property Berhad.

Our Take On Kerjaya Prospek Property Berhad’s Profit Performance

Kerjaya Prospek Property Berhad shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. As a result, we think it may well be the case that Kerjaya Prospek Property Berhad’s underlying earnings power is lower than its statutory profit. And we are pleased to note that EPS is at least heading in the right direction in the alst twelve months. 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. In light of this, if you’d like to do more analysis on the company, it’s vital to be informed of the risks involved. At Simply Wall St, we found 3 warning signs for Kerjaya Prospek Property Berhad and we think they deserve your attention.

Story continues

This note has only looked at a single factor that sheds light on the nature of Kerjaya Prospek Property Berhad’s profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com