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Capstone Copper Corp. (TSE:CS) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.
Check out our latest analysis for Capstone Copper
In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, Capstone Copper issued 10% more new shares over the last year. That means its earnings are split among a greater number of shares. 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 Capstone Copper's EPS by clicking here.
A Look At The Impact Of Capstone Copper's Dilution On Its Earnings Per Share (EPS)
As it happens, we don't know how much the company made or lost three years ago, because we don't have the data. 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. But mathematics aside, it is always good to see when a formerly unprofitable business come good (though we accept profit would have been higher if dilution had not been required). Therefore, the dilution is having a noteworthy influence on shareholder returns.
In the long term, if Capstone Copper's 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 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 Capstone Copper's Profit Performance
Capstone Copper issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that Capstone Copper's statutory profits are better than its underlying earnings power. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 2 warning signs for Capstone Copper you should be aware of.