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Chord Energy Corporation's (NASDAQ:CHRD) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.
View our latest analysis for Chord Energy
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, Chord Energy issued 48% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. You can see a chart of Chord Energy's EPS by clicking here.
A Look At The Impact Of Chord Energy's Dilution On Its Earnings Per Share (EPS)
Chord Energy has improved its profit over the last three years, with an annualized gain of 78% in that time. Net profit actually dropped by 15% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 26%. So you can see that the dilution has had a fairly significant impact on shareholders.
If Chord Energy's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.
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 Chord Energy's Profit Performance
Chord Energy issued shares during the year, and that means its EPS performance lags its net income growth. As a result, we think it may well be the case that Chord Energy's underlying earnings power is lower than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. So while earnings quality is important, it's equally important to consider the risks facing Chord Energy at this point in time. At Simply Wall St, we found 2 warning signs for Chord Energy and we think they deserve your attention.
This note has only looked at a single factor that sheds light on the nature of Chord Energy'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 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.