Journey Energy's (TSE:JOY) Problems Go Beyond Poor Profit

editorial-team@simplywallst.com (Simply Wall St)

Thu, May 15, 2025, 5:59 AM 4 min read

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Journey Energy increased the number of shares on issue by 9.4% 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 Journey Energy's EPS by clicking here.

How Is Dilution Impacting Journey Energy's Earnings Per Share (EPS)?

Journey Energy's net profit dropped by 91% per year over the last three years. Even looking at the last year, profit was still down 24%. Sadly, earnings per share fell further, down a full 25% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

If Journey 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.

The Impact Of Unusual Items On Profit

Alongside that dilution, it's also important to note that Journey Energy's profit was boosted by unusual items worth CA$11m in the last twelve months. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Journey Energy's positive unusual items were quite significant relative to its profit in the year to March 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Journey Energy's Profit Performance

In its last report Journey Energy benefitted from unusual items which boosted its profit, which could make the profit seem better than it really is on a sustainable basis. And furthermore, it went and issued plenty of new shares, ensuring that each shareholder (who did not tip more money in) now owns a smaller proportion of the company. For the reasons mentioned above, we think that a perfunctory glance at Journey Energy's statutory profits might make it look better than it really is on an underlying level. If you want to do dive deeper into Journey Energy, you'd also look into what risks it is currently facing. For example - Journey Energy has 2 warning signs we think you should be aware of.

Our examination of Journey Energy has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.