The subdued market reaction suggests that Chord Energy Corporation’s (NASDAQ:CHRD) recent earnings didn’t contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.
Check out our latest analysis for Chord Energy
In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Chord Energy increased the number of shares on issue by 49% 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. You can see a chart of Chord Energy’s EPS by clicking here.
How Is Dilution Impacting Chord Energy’s Earnings Per Share (EPS)?
Chord Energy has improved its profit over the last three years, with an annualized gain of 114% in that time. Net income was down 50% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 52%. So you can see that the dilution has had a fairly significant impact on shareholders.
In the long term, if Chord Energy’s earnings per share can increase, then the share price should too. 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 Chord Energy’s Profit Performance
Chord Energy issued shares during the year, and that means its EPS performance lags its net income growth. For this reason, we think that Chord Energy’s statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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 want to do dive deeper into Chord Energy, you’d also look into what risks it is currently facing. Case in point: We’ve spotted 3 warning signs for Chord Energy you should be aware of.
This note has only looked at a single factor that sheds light on the nature of Chord Energy’s profit. But there are plenty of other ways to inform your opinion of a company. 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.
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.