Weak Statutory Earnings May Not Tell The Whole Story For ONE Gas (NYSE:OGS)

The subdued market reaction suggests that ONE Gas, Inc.'s (NYSE:OGS) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for ONE Gas

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. ONE Gas expanded the number of shares on issue by 5.9% 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. Check out ONE Gas' historical EPS growth by clicking on this link.

How Is Dilution Impacting ONE Gas' Earnings Per Share (EPS)?

As you can see above, ONE Gas has been growing its net income over the last few years, with an annualized gain of 8.0% over three years. Net income was down 3.6% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 5.7%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if ONE Gas' 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 the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

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 ONE Gas' Profit Performance

Over the last year ONE Gas issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that ONE Gas' true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that ONE Gas has 2 warning signs (1 is a bit concerning!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of ONE Gas' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.