Yahoo Finance CR Energy's (ETR:CRZK) Sluggish Earnings Might Be Just The Beginning Of Its Problems
CR Energy AG's (ETR:CRZK) 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 CR Energy
In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. CR Energy expanded the number of shares on issue by 29% 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. Check out CR Energy's historical EPS growth by clicking on this link.
How Is Dilution Impacting CR Energy's Earnings Per Share (EPS)?
CR Energy's net profit dropped by 83% per year over the last three years. Even looking at the last year, profit was still down 79%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 84% in the same period. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.
If CR 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 CR Energy's Profit Performance
Over the last year CR Energy issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that CR Energy'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. 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 while earnings quality is important, it's equally important to consider the risks facing CR Energy at this point in time. You'd be interested to know, that we found 2 warning signs for CR Energy and you'll want to know about them.
This note has only looked at a single factor that sheds light on the nature of CR Energy's 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
