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The market wasn't impressed with the soft earnings from Calfrac Well Services Ltd. (TSE:CFW) recently. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.
Check out our latest analysis for Calfrac Well Services
In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Calfrac Well Services increased the number of shares on issue by 5.8% 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 Calfrac Well Services' historical EPS growth by clicking on this link.
How Is Dilution Impacting Calfrac Well Services' Earnings Per Share (EPS)?
We don't have any data on the company's profits from three years ago. And even focusing only on the last twelve months, we see profit is down 86%. Sadly, earnings per share fell further, down a full 88% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.
If Calfrac Well Services' 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 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 Calfrac Well Services' Profit Performance
Calfrac Well Services issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Calfrac Well Services' true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 3 warning signs for Calfrac Well Services you should be mindful of and 1 of them is a bit unpleasant.