Chord Energy's (NASDAQ:CHRD) Sluggish Earnings Might Be Just The Beginning Of Its Problems

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.

See our latest analysis for Chord Energy

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Chord Energy increased the number of shares on issue by 48% 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 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 78% in that time. Net income was down 15% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 26%. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

If Chord 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 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 Chord Energy's Profit Performance

Over the last year Chord Energy issued new shares and so, there's a noteworthy divergence between EPS and 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. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Chord Energy has 2 warning signs we think 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 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. 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.