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A lackluster earnings announcement from ONE Gas, Inc. (NYSE:OGS) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.
See our latest analysis for ONE Gas
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, ONE Gas issued 5.9% more new shares over the last year. That means its earnings are split among 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 ONE Gas' EPS by clicking here.
A Look At The Impact Of ONE Gas' Dilution On Its Earnings Per Share (EPS)
ONE Gas has improved its profit over the last three years, with an annualized gain of 8.0% in that time. Net income was down 3.6% over the last twelve months. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 5.7%. So you can see that the dilution has had a bit of an impact on shareholders.
In the long term, if ONE Gas' 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.
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 ONE Gas' Profit Performance
ONE Gas issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that ONE Gas' true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about ONE Gas as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with ONE Gas (including 1 which shouldn't be ignored).
Today we've zoomed in on a single data point to better understand the nature of ONE Gas' 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.