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ConocoPhillips' (NYSE:COP) stock showed strength, with investors undeterred by its weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.
One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, ConocoPhillips increased the number of shares on issue by 7.9% over the last twelve months by issuing new shares. 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. Check out ConocoPhillips' historical EPS growth by clicking on this link.
A Look At The Impact Of ConocoPhillips' Dilution On Its Earnings Per Share (EPS)
Unfortunately, ConocoPhillips' profit is down 26% per year over three years. And even focusing only on the last twelve months, we see profit is down 9.8%. Sadly, earnings per share fell further, down a full 11% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.
If ConocoPhillips' 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 ConocoPhillips' Profit Performance
Over the last year ConocoPhillips issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that ConocoPhillips' true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. If you want to do dive deeper into ConocoPhillips, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for ConocoPhillips and we think they deserve your attention.