The EQ filter stands for Earnings Quality, a rating from Very High to Very Low that shows how reliable a company's reported earnings are. You'll see it as the Earnings Quality chip on a stock's Power Gauge Rating page and in the Earnings Quality column of a list's Health Check.

Some companies make their earnings look good on paper, but the cash tells a different story. Earnings Quality helps you spot that.

⚙️ How Is Earnings Quality Calculated?

Earnings Quality combines two financial checks.

1. Cash Conversion

Cash Conversion measures how well a company turns its earnings into actual cash.

• It compares the income statement with the cash flow statement.
• The result is a percentage showing how much of the reported profit becomes cash.
• A result close to 100% is ideal: the company's earnings are backed by cash. A lower number suggests weak cash flow or aggressive accounting.

💡 Tip: Think of it like this: would you rather someone tell you they "earned" money, or show you the money in their hand?

2. Accruals

Accruals measure how much of a company's earnings are non-cash-based. 

• It uses data from all three of the company's financial reports: the income statement, balance sheet and cash flow statement.
• If a company is earning money mostly from accruals (like unpaid sales or estimates), that can be risky. 
• A lower accrual score is better: the profits are more likely to be real.

After calculating both scores, the system ranks each company against all the others in the market and places it into one of five ratings – from Very High to Very Low – so you can easily spot which companies have the strongest earnings quality. 

🎯 What Do the Earnings Quality Ratings Mean?

• Very High: excellent earnings quality
• High: good earnings quality
• Neutral: average
• Low: below average
• Very Low: poor earnings quality

Use the rating as one input when deciding whether to invest in a stock or avoid it.

📍 Where Can I See a Stock's Earnings Quality?

✅ 1. On the stock's Power Gauge Rating page

Look up the stock and find the Earnings Quality chip (for example, Earnings Quality: Neutral) under the company name, below the industry and earnings-report chips.

 ✅ 2. In a list's Health Check

To see Earnings Quality for every stock in one of your lists:

1. Click My Chaikin in the top navigation bar, then the Health Check tab.
2. Pick the list in the left sidebar.
3. On the Holdings tab, look at the Earning Quality column, which shows each stock's rating as an icon.

The Earnings tab also has an Earnings Quality column, but it only lists companies reporting earnings in the week or month you select. See Viewing a Health Check and Triggered Alerts on a List.

❓ Why Did the EQ Rating Change If the Company Didn't Report?

Even if the company has not just reported earnings, the EQ rating can still change. Here's why:

• We wait for official filings. The rating updates after the company files its earnings with the SEC, not when the media reports the numbers, so it uses final, verified data.
• Earnings Quality is relative. Each stock is ranked against the others. When other companies report better or worse results, your stock's rating can shift, even with no new data of its own. That's totally normal – it's just the model adjusting the keep things accurate and up to date. 

🔒 Who Has Access to Earnings Quality?

Earnings Quality is only included with Breakthrough Investor and The Chaikin Trust. See What's Included in Each Chaikin Subscription for a full comparison.

If you do not see it and would like to accessit, call us at (877) 697-6783, Monday through Friday, 9am to 5pm ET.