Weak Statutory Earnings May Not Tell The Whole Story For Core Natural Resources (NYSE:CNR)

A lackluster earnings announcement from Core Natural Resources, Inc. (NYSE:CNR) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Core Natural Resources

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Core Natural Resources increased the number of shares on issue by 82% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a chart of Core Natural Resources' EPS by clicking here.

How Is Dilution Impacting Core Natural Resources' Earnings Per Share (EPS)?

Core Natural Resources has improved its profit over the last three years, with an annualized gain of 740% in that time. Net profit actually dropped by 56% in the last year. But the EPS result was even worse, with the company recording a decline of 52%. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

In the long term, if Core Natural Resources' earnings per share can increase, then the share price should too. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 Core Natural Resources' Profit Performance

Over the last year Core Natural Resources issued new shares and so, there's a noteworthy divergence between EPS and net income growth. As a result, we think it may well be the case that Core Natural Resources' underlying earnings power is lower than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Be aware that Core Natural Resources is showing 2 warning signs in our investment analysis and 1 of those doesn't sit too well with us...

This note has only looked at a single factor that sheds light on the nature of Core Natural Resources' 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. 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.