Concerns Surrounding Confidence Petroleum India's (NSE:CONFIPET) Performance

The stock price didn't jump after Confidence Petroleum India Limited (NSE:CONFIPET) posted decent earnings last week. We did some digging and believe investors may be worried about some underlying factors in the report.

View our latest analysis for Confidence Petroleum India

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Confidence Petroleum India increased the number of shares on issue by 14% 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. Check out Confidence Petroleum India's historical EPS growth by clicking on this link.

A Look At The Impact Of Confidence Petroleum India's Dilution On Its Earnings Per Share (EPS)

As you can see above, Confidence Petroleum India has been growing its net income over the last few years, with an annualized gain of 107% over three years. And over the last 12 months, the company grew its profit by 13%. But in comparison, EPS only increased by 11% 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 Confidence Petroleum India 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 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 Confidence Petroleum India.

Our Take On Confidence Petroleum India's Profit Performance

Confidence Petroleum India 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 Confidence Petroleum India's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. 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 1 warning sign for Confidence Petroleum India you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Confidence Petroleum India's 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. 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.

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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.