In This Article:
Last week's earnings announcement from Journey Energy Inc. (TSE:JOY) was disappointing to investors, with a sluggish profit figure. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.
See our latest analysis for Journey 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, Journey Energy issued 10% more new shares over the last year. As a result, its net income is now split between a greater number of shares. 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 Journey Energy's EPS by clicking here.
A Look At The Impact Of Journey Energy's Dilution On Its Earnings Per Share (EPS)
Unfortunately, Journey Energy's profit is down 96% per year over three years. Even looking at the last year, profit was still down 95%. Sadly, earnings per share fell further, down a full 96% in that time. So you can see that the dilution has had a bit of an impact on shareholders.
If Journey Energy's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Journey Energy.
Our Take On Journey Energy's Profit Performance
Over the last year Journey Energy issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Journey Energy's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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 Journey Energy as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Journey Energy has 3 warning signs and it would be unwise to ignore these.
This note has only looked at a single factor that sheds light on the nature of Journey Energy's 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.