Northwest Natural Holding's (NYSE:NWN) Problems Go Beyond Weak Profit

A lackluster earnings announcement from Northwest Natural Holding Company (NYSE:NWN) 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 Northwest Natural Holding

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Northwest Natural Holding expanded the number of shares on issue by 9.1% over the last year. Therefore, each share now receives a smaller portion of profit. 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 Northwest Natural Holding's EPS by clicking here.

How Is Dilution Impacting Northwest Natural Holding's Earnings Per Share (EPS)?

Unfortunately, Northwest Natural Holding's profit is down 6.5% per year over three years. Even looking at the last year, profit was still down 19%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 24% in the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Northwest Natural Holding's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

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 Northwest Natural Holding's Profit Performance

Northwest Natural Holding issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Northwest Natural Holding's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. Our analysis shows 3 warning signs for Northwest Natural Holding (2 don't sit too well with us!) and we strongly recommend you look at these before investing.

Today we've zoomed in on a single data point to better understand the nature of Northwest Natural Holding'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.