A lackluster earnings announcement from Drilling Tools International Corporation (NASDAQ:DTI) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Drilling Tools International issued 17% more new shares over the last year. That means its earnings are split among a greater number of shares. 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 Drilling Tools International's EPS by clicking here.

How Is Dilution Impacting Drilling Tools International's Earnings Per Share (EPS)?

Drilling Tools International was losing money three years ago. And even focusing only on the last twelve months, we see profit is down 52%. Sadly, earnings per share fell further, down a full 74% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if Drilling Tools International's earnings per share can increase, then the share price should too. 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 Drilling Tools International's Profit Performance

Drilling Tools International issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that Drilling Tools International's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 2 warning signs for Drilling Tools International you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Drilling Tools International's profit. 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. 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.