We Think That There Are More Issues For Exxon Mobil (NYSE:XOM) Than Just Sluggish Earnings

Exxon Mobil Corporation's (NYSE:XOM) recent weak earnings report didn't cause a big stock movement. 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 Exxon Mobil

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Exxon Mobil issued 11% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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 Exxon Mobil's EPS by clicking here.

A Look At The Impact Of Exxon Mobil's Dilution On Its Earnings Per Share (EPS)

Three years ago, Exxon Mobil lost money. And even focusing only on the last twelve months, we see profit is down 34%. Sadly, earnings per share fell further, down a full 33% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if Exxon Mobil's 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 Exxon Mobil's Profit Performance

Exxon Mobil issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Exxon Mobil's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Exxon Mobil, and understanding it should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Exxon Mobil's profit. 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.