Beyond Lackluster Earnings: Potential Concerns For Journey Energy's (TSE:JOY) Shareholders

Shareholders didn't appear too concerned by Journey Energy Inc.'s (TSE:JOY) weak earnings. We did some analysis and found some concerning details beneath the statutory profit number.

See our latest analysis for Journey Energy

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Journey Energy increased the number of shares on issue by 9.4% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. 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 Journey Energy's EPS by clicking here.

How Is Dilution Impacting Journey Energy's Earnings Per Share (EPS)?

Journey Energy's net profit dropped by 95% per year over the last three years. Even looking at the last year, profit was still down 67%. Sadly, earnings per share fell further, down a full 69% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

If Journey Energy's 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Journey Energy.

The Impact Of Unusual Items On 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Journey Energy had a rather significant contribution from unusual items relative to its profit 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.

Our Take On Journey Energy's Profit Performance

In its last report Journey Energy benefitted from unusual items which boosted its profit, which could make the profit seem better than it really is on a sustainable basis. And furthermore, it went and issued plenty of new shares, ensuring that each shareholder (who did not tip more money in) now owns a smaller proportion of the company. Considering all this we'd argue Journey Energy's profits probably give an overly generous impression of its sustainable level of profitability. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Journey Energy has 3 warning signs we think you should be aware of.

In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.