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Journey Energy Inc.'s (TSE:JOY) stock wasn't much affected by its recent lackluster earnings numbers. We did some digging, and we believe that investors are missing some worrying factors underlying the profit figures.
See our latest analysis for Journey Energy
To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Journey Energy issued 9.4% 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. Check out Journey Energy's historical EPS growth by clicking on this link.
A Look At The Impact Of Journey Energy's Dilution On Its Earnings Per Share (EPS)
Journey Energy's net profit dropped by 95% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 67%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 69% in the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.
In the long term, if Journey Energy's earnings per share can increase, then the share price should too. 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.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Journey Energy.
How Do Unusual Items Influence Profit?
Alongside that dilution, it's also important to note that Journey Energy's profit was boosted by unusual items worth CA$5.7m in the last twelve months. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. We can see that Journey Energy's positive unusual items were quite significant relative to its profit in the year to December 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.