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Epsilon Energy (EPSN): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q2 2026, to Jun 30, 2026, filed Aug 12, 2026; rules v1.1
Epsilon Energy (EPSN): 2 rules of 10 triggered on the filings to Jun 30, 2026: receivables growing = future cash is certain; stock compensation added back = no economic cost; 5 with insufficient data; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
Receivables growing = future cash is certain Triggered · severity high · confidence medium
Receivables grew 218% year over year in Q2 2026 against revenue growth of 57%, and the quarter before 110% against 58%; days sales outstanding is 85 against a median of 53 over the eight quarters before. More of each quarter's revenue is still owed by customers.
Innocent reading: Seasonality: a quarter that always ends with big shipments.
Stock compensation added back = no economic cost Triggered · severity medium · confidence high
Stock compensation was $2M, 3.4% of revenue, in FY2025; buybacks were $0 (0.0× the SBC) and the diluted share count still rose 5.0%. 'Adjusted' figures that add SBC back treat pay in shares as free; the cost is borne by every shareholder as dilution, or by the cash spent to buy the shares back.
Innocent reading: A young company paying in equity while it scales; intensity falls as revenue grows.
Every rule
A01 FCF growth = the business improved Insufficient data
fewer than two fiscal years with operating cash flow and capital expenditure on file
A07 Stock compensation added back = no economic cost Triggered severity medium · confidence high
Stock compensation was $2M, 3.4% of revenue, in FY2025; buybacks were $0 (0.0× the SBC) and the diluted share count still rose 5.0%. 'Adjusted' figures that add SBC back treat pay in shares as free; the cost is borne by every shareholder as dilution, or by the cash spent to buy the shares back.
The figures and how they are read
| Fiscal year | FY2025 |
| Stock compensation | $2M |
| Revenue | $52M |
| SBC / revenue | +3.4% |
| Buybacks | 0 |
| Buybacks / SBC | 0.0 |
| Diluted shares, year before | 21.9M shares |
| Diluted shares | 23.0M shares |
| Diluted shares: change | +5.0% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY2025 (stock compensation, buybacks and the diluted share count, fiscal year)
What would explain it innocently
- A young company paying in equity while it scales; intensity falls as revenue grows
- Buybacks at prices below intrinsic value make up for the dilution over time
- A one-off grant (an acquisition, a founder award) rather than a steady level
What to look for in the filing
- The share count after the latest buybacks (the next 10-Q's cover)
- The price paid for the buybacks against the shares' value
- Unvested awards outstanding
What would show the trap does not apply
- The diluted share count falls over two years with buybacks at least equal to the stock compensation
- Stock compensation falls as a share of revenue in each of the next two years
Look again: next filing.
B02 Receivables growing = future cash is certain Triggered severity high · confidence medium
Receivables grew 218% year over year in Q2 2026 against revenue growth of 57%, and the quarter before 110% against 58%; days sales outstanding is 85 against a median of 53 over the eight quarters before. More of each quarter's revenue is still owed by customers.
The figures and how they are read
| Quarter | Q2 2026 |
| Revenue, year over year | +57.1% |
| Receivables, year over year | +217.9% |
| Quarter before | Q1 2026 |
| Revenue y/y, quarter before | +58.4% |
| Receivables y/y, quarter before | +109.8% |
| Days sales outstanding | 85.4 |
| DSO, median of eight quarters | 53.1 |
| Receivables | $17M |
| Revenue | $18M |
receivables and revenue against the same quarter a year earlier; DSO = receivables / quarterly revenue × days, against the median of the eight quarters before
Source: Q2 2026 (receivables and revenue) · Q2 2025 (the same quarter a year earlier)
What would explain it innocently
- Seasonality: a quarter that always ends with big shipments
- An acquisition brought its own receivables
- New business with longer standard terms (government, large enterprise)
- Currency: receivables booked in a strengthening currency
What to look for in the filing
- The receivables ageing and the allowance for credit losses
- Any factoring or receivables sold (and whether with recourse)
- Credit terms by customer group
What would show the trap does not apply
- Receivables fall back in line with revenue in the next quarter and DSO returns to its history
- The 10-Q attributes the increase to a disclosed one-off (a large customer's timing, an acquisition) and the allowance for doubtful accounts did not rise
Look again: next filing.
B08 Adjusted profit = economic profit Insufficient data
no reconciliation table read from the releases yet and fewer than three quarters with both an adjusted and a GAAP EPS
C02 Low net debt = no refinancing risk Insufficient data
no debt figure could be read from the balance sheet (the filing may tag it in other lines)
D03 EPS growth = profit growth Not triggered confidence high
EPS rose 236% and net income rose 360% in Q2 2026; the share count rose 37.0%: EPS growth follows profit growth.
The figures and how they are read
| Quarter | Q2 2026 |
| Quarter before | Q2 2025 |
| EPS, year before | $0.07 |
| EPS | $0.23 |
| Net income, year before | $2M |
| Net income | $7M |
| Diluted shares, year before | 22.2M shares |
| Diluted shares | 30.4M shares |
| EPS growth | +235.7% |
| Net income growth | +359.8% |
| Diluted shares: change | +37.0% |
| eps from profit | $0.25 |
| eps from share count | -$0.09 |
EPS and net income against the same quarter a year earlier; the EPS bridge attributes the change to profit first, then to the share count (the order is fixed and disclosed)
Source: Q2 2026 (net income, diluted shares, EPS) · Q2 2025 (the same quarter a year earlier)
E02 Low P/E at a cyclical peak = undervalued Insufficient data
no market value or trailing net income in the valuation research
E07 A precise DCF value = the true value Insufficient data
no DCF in the valuation research for this company
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → Epsilon Energy: cash flow →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.