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Tourmaline Oil Corp.'s (TSE:TOU) robust recent earnings didn't do much to move the stock. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.
See our latest analysis for Tourmaline Oil
One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Tourmaline Oil increased the number of shares on issue by 9.0% over the last twelve months by issuing new shares. 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 Tourmaline Oil's EPS by clicking here.
A Look At The Impact Of Tourmaline Oil's Dilution On Its Earnings Per Share (EPS)
Tourmaline Oil's net profit dropped by 6.2% per year over the last three years. On the bright side, in the last twelve months it grew profit by 55%. On the other hand, earnings per share are only up 50% over the same period. So you can see that the dilution has had a bit of an impact on shareholders.
Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Tourmaline Oil shareholders will want to see that EPS figure continue to increase. 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.
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 Tourmaline Oil's Profit Performance
Tourmaline Oil shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that Tourmaline Oil's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 50% in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Tourmaline Oil has 3 warning signs and it would be unwise to ignore these.