Soft earnings didn't appear to concern Casella Waste Systems, Inc.'s (NASDAQ:CWST) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

Our free stock report includes 4 warning signs investors should be aware of before investing in Casella Waste Systems. Read for free now.NasdaqGS:CWST Earnings and Revenue History May 10th 2025

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Casella Waste Systems issued 9.2% more new shares over the last year. As a result, its net income is now split between 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 Casella Waste Systems' historical EPS growth by clicking on this link.

How Is Dilution Impacting Casella Waste Systems' Earnings Per Share (EPS)?

Unfortunately, Casella Waste Systems' profit is down 69% per year over three years. Even looking at the last year, profit was still down 28%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 33% in the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Casella Waste Systems' EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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

On top of the dilution, we should also consider the US$33m impact of unusual items in the last year, which had the effect of suppressing profit. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Casella Waste Systems doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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Our Take On Casella Waste Systems' Profit Performance

To sum it all up, Casella Waste Systems took a hit from unusual items which pushed its profit down; without that, it would have made more money. But on the other hand, the company issued more shares, so without buying more shares each shareholder will end up with a smaller part of the profit. Considering the aforementioned, we think that Casella Waste Systems' profits are probably a reasonable reflection of its underlying profitability; although we'd be confident in that conclusion if we saw a cleaner set of results. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Be aware that Casella Waste Systems is showing 4 warning signs in our investment analysis and 1 of those is a bit concerning...

Our examination of Casella Waste Systems has focussed on certain factors that can make its earnings look better than they are. 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.

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