Like any other real life formula, the best we can do is an approximation based on large data sets. The original formula seems to have changed once they made armor insane. It's probably weighted severely towards the weapon , with moderate weighting towards hero strength and minimal weight (if any) towards armor attack value. That's the most precision we can get with so many disparate factors and no access to the actual server side equations.
This being said, we know for a fact it's not a one to one correlation like it used to be. But that's irrelevant. Because even if it were Gree would just add on to the mobs health to rebalance the difficulty. So just keep putting points into HS and upgrading your weapon, the armor will come as a side effect of that. After that there's nothing else you can do to improve your damage. It only matters that you do within 25% or so of the maximum hit the strongest player can do anyway. Because that's probably where they balance the health amounts to. They limit the amount you can do because they need to make money off of you during LTQs. But even if you got the magic Gree fairy to improve your average damage by 20 points with no difference in health, you save what, 20 attacks over the course of an LTQ? Because if it was a one hit before , it doesn't matter. If it was a multiple hit boss, it May save you one attack. It only saves you large amounts of energy on the quest stages where you can Almost one shot mobs, but leave them with a sliver of health. I've done the calculations, and at almost any level of hero strength, small jumps like that (read:weapon upgrades) only save you 5-10% energy, tops. It's usually in the range of 3%. The only people who should be killing themselves are the ones who've missed the previous weapons enough that it's like a 50 point upgrade or more.
As far as skill points go; the reasoning behind the predominant recommendation [putting virtually all of your points into HS] isn't because HS is awesome for improving your damage. It's because (outside of having a reasonable amount of stamina, say 12-15) there's nothing else worthwhile to put them into. Attack and Defense are supposed to be a percentage modifier on your win/loss chance, but this once again seems to have changed when they handed out +100 attack skill bonuses like they were on clearance. They probably added in a weighting to them that makes them all but worthless.
All of these claims are just that, claims. But they are based on a wealth of data from people who thoroughly enjoy spreadsheets. YMMV.
TL;DR : just keep upgrading. It'll be ok.
Edit: and for all those who say "but I hit three (or three dozen) times and my damage went down!" - at my workplace a data set with less than 10k data points is considered "small". We define a rigorous set as one with at least 100k data points. Just for scope clarification.