The stock price didn't jump after ONEOK, Inc. (NYSE:OKE) posted decent earnings last week. We think that investors might be worried about some concerning underlying factors.

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In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, ONEOK issued 7.0% more new shares over the last year. As a result, its net income is now split between a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a chart of ONEOK's EPS by clicking here.

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

ONEOK has improved its profit over the last three years, with an annualized gain of 102% in that time. But EPS was only up 52% per year, in the exact same period. And at a glance the 35% gain in profit over the last year impresses. On the other hand, earnings per share are only up 18% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, earnings per share growth should beget share price growth. So ONEOK 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.

Our Take On ONEOK's Profit Performance

Each ONEOK share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that ONEOK's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 52% over the last three years. 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. If you want to do dive deeper into ONEOK, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for ONEOK and we think they deserve your attention.

Story Continues

This note has only looked at a single factor that sheds light on the nature of ONEOK'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.

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