Despite posting strong earnings, Equinox Gold Corp.'s (TSE:EQX) stock didn't move much over the last week. We looked deeper into the numbers and found that shareholders might be concerned with some underlying weaknesses.

Check out our latest analysis for Equinox Gold

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Equinox Gold increased the number of shares on issue by 46% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. 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 Equinox Gold's historical EPS growth by clicking on this link.

A Look At The Impact Of Equinox Gold's Dilution On Its Earnings Per Share (EPS)

We don't have any data on the company's profits from three years ago. The good news is that profit was up 415% in the last twelve months. On the other hand, earnings per share are only up 339% over the same period. So you can see that the dilution has had a fairly significant impact on shareholders.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Equinox Gold shareholders will want to see that EPS figure continue to increase. 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.

The Impact Of Unusual Items On Profit

Alongside that dilution, it's also important to note that Equinox Gold's profit was boosted by unusual items worth US$476m in the last twelve months. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. Equinox Gold had a rather significant contribution from unusual items relative to its profit to September 2024. 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 Equinox Gold's Profit Performance

To sum it all up, Equinox Gold got a nice boost to profit from unusual items; without that, its statutory results would have looked worse. 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. Considering all this we'd argue Equinox Gold's profits probably give an overly generous impression of its sustainable level of profitability. If you want to do dive deeper into Equinox Gold, 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 Equinox Gold (including 1 which is concerning).

Our examination of Equinox Gold 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 are plenty of other ways to inform your opinion of a company. 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.