The subdued market reaction suggests that EQT Corporation's (NYSE:EQT) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. EQT expanded the number of shares on issue by 22% 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 EQT's EPS by clicking here.

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

EQT was losing money three years ago. And even focusing only on the last twelve months, we see profit is down 2.0%. Sadly, earnings per share fell further, down a full 4.8% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if EQT'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 EQT's Profit Performance

Over the last year EQT issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that EQT's statutory profits are better than its underlying earnings power. 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. If you'd like to know more about EQT as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that EQT has 2 warning signs and it would be unwise to ignore these.

This note has only looked at a single factor that sheds light on the nature of EQT'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 that insiders are buying.

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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.