Yahoo Finance DorianG's (NYSE:LPG) Solid Profits Have Weak Fundamentals
Despite announcing strong earnings, Dorian LPG Ltd.'s (NYSE:LPG) stock was sluggish. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.
See our latest analysis for DorianG
In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, DorianG increased the number of shares on issue by 5.5% 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 talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. You can see a chart of DorianG's EPS by clicking here.
How Is Dilution Impacting DorianG's Earnings Per Share (EPS)?
As you can see above, DorianG has been growing its net income over the last few years, with an annualized gain of 256% over three years. And the 54% profit boost in the last year certainly seems impressive at first glance. But in comparison, EPS only increased by 53% over the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.
Changes in the share price do tend to reflect changes in earnings per share, in the long run. So it will certainly be a positive for shareholders if DorianG can grow EPS persistently. 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 DorianG's Profit Performance
Each DorianG share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that DorianG's statutory profits are better than its underlying earnings power. 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. If you want to do dive deeper into DorianG, you'd also look into what risks it is currently facing. To that end, you should learn about the 3 warning signs we've spotted with DorianG (including 1 which can't be ignored).
This note has only looked at a single factor that sheds light on the nature of DorianG'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.
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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.
