Despite posting some strong earnings, the market for Keppel Infrastructure Trust's (SGX:A7RU) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Keppel Infrastructure Trust expanded the number of shares on issue by 13% over the last year. Therefore, each share now receives a smaller portion of profit. 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 Keppel Infrastructure Trust's EPS by clicking here.

A Look At The Impact Of Keppel Infrastructure Trust's Dilution On Its Earnings Per Share (EPS)

Keppel Infrastructure Trust has improved its profit over the last three years, with an annualized gain of 75% in that time. In comparison, earnings per share only gained 61% over the same period. And at a glance the 11,049% gain in profit over the last year impresses. But in comparison, EPS only increased by 10,239% over the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, earnings per share growth should beget share price growth. So Keppel Infrastructure Trust shareholders will want to see that EPS figure continue to increase. 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.

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 Keppel Infrastructure Trust's Profit Performance

Each Keppel Infrastructure Trust share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Keppel Infrastructure Trust's true underlying earnings power is actually less than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. 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. Be aware that Keppel Infrastructure Trust is showing 3 warning signs in our investment analysis and 2 of those shouldn't be ignored...

This note has only looked at a single factor that sheds light on the nature of Keppel Infrastructure Trust's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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