A lackluster earnings announcement from Travelite Holdings Ltd. (SGX:BCZ) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.
In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Travelite Holdings increased the number of shares on issue by 50% over the last twelve months by issuing new shares. 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. Check out Travelite Holdings' historical EPS growth by clicking on this link.
A Look At The Impact Of Travelite Holdings' Dilution On Its Earnings Per Share (EPS)
Three years ago, Travelite Holdings lost money. And even focusing only on the last twelve months, we see profit is down 12%. Sadly, earnings per share fell further, down a full 12% in that time. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.
In the long term, if Travelite Holdings' earnings per share can increase, then the share price should too. 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 Travelite Holdings.
Our Take On Travelite Holdings' Profit Performance
Travelite Holdings issued shares during the year, and that means its EPS performance lags its net income growth. For this reason, we think that Travelite Holdings' 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. 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. If you'd like to know more about Travelite Holdings as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for Travelite Holdings (2 don't sit too well with us) you should be familiar with.
This note has only looked at a single factor that sheds light on the nature of Travelite Holdings' 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.
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.