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Edvance International Holdings' (HKG:1410) Earnings Quality Is Low
Edvance International Holdings' (HKG:1410) Earnings Quality Is Low
Edvance International Holdings Limited (HKG:1410) recently posted soft earnings but shareholders didn't react strongly. We did some digging, and we believe that investors are missing some worrying factors underlying the profit figures.
Check out our latest analysis for Edvance International Holdings
SEHK:1410 Earnings and Revenue History July 14th 2022Examining Cashflow Against Edvance International Holdings' Earnings
One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the accrual ratio. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. The ratio shows us how much a company's profit exceeds its FCF.
As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.
Over the twelve months to March 2022, Edvance International Holdings recorded an accrual ratio of 0.31. We can therefore deduce that its free cash flow fell well short of covering its statutory profit, suggesting we might want to think twice before putting a lot of weight on the latter. Over the last year it actually had negative free cash flow of HK$15m, in contrast to the aforementioned profit of HK$22.8m. It's worth noting that Edvance International Holdings generated positive FCF of HK$26m a year ago, so at least they've done it in the past. However, that's not all there is to consider. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Edvance International Holdings.
How Do Unusual Items Influence Profit?
The fact that the company had unusual items boosting profit by HK$17m, in the last year, probably goes some way to explain why its accrual ratio was so weak. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. Edvance International Holdings had a rather significant contribution from unusual items relative to its profit to March 2022. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.
Our Take On Edvance International Holdings' Profit Performance
Summing up, Edvance International Holdings received a nice boost to profit from unusual items, but could not match its paper profit with free cash flow. Considering all this we'd argue Edvance International Holdings' profits probably give an overly generous impression of its sustainable level of profitability. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. When we did our research, we found 3 warning signs for Edvance International Holdings (1 makes us a bit uncomfortable!) that we believe deserve your full attention.
Our examination of Edvance International Holdings has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. But there are plenty of other ways to inform your opinion of a company. 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 that insiders are buying.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
爱德万斯国际控股有限公司(HKG:1410)最近公布了疲软的收益,但股东的反应并不强烈。我们做了一些调查,我们认为投资者忽略了利润数据背后的一些令人担忧的因素。
查看我们对Edvance International Holdings的最新分析
联交所:1410盈利及收入历史2022年7月14日审查现金流与爱德万斯国际控股公司的收益
衡量一家公司将利润转换为自由现金流(FCF)的程度的一个关键财务比率是应计比率。简单地说,这个比率是从净利润中减去FCF,然后用这个数字除以该公司在此期间的平均运营资产。这个比率向我们展示了一家公司的利润超过了它的FCF的多少。
因此,负的应计比率对公司是积极的,而正的应计比率是负的。虽然应计比率高于零并不令人担忧,但我们确实认为,当一家公司的应计比率相对较高时,这一点值得注意。这是因为一些学术研究表明,高应计制比率往往会导致较低的利润或较低的利润增长。
在截至2022年3月的12个月中,爱德万斯国际控股公司的应计比率为0.31。因此,我们可以推断,它的自由现金流远远低于其法定利润,这表明我们在加大对后者的重视之前,可能需要三思而后行。在过去的一年里,它实际上负面自由现金流为1500万港元,而上述利润为2280万港元。值得注意的是,爱德万斯国际控股一年前产生了2600万港元的正FCF,所以至少他们过去做到了。然而,这并不是需要考虑的全部问题。我们可以看到,不寻常的项目影响了其法定利润,从而影响了应计比率。
注:我们总是建议投资者检查资产负债表的实力。单击此处查看我们对Edvance International Holdings的资产负债表分析。
不寻常的项目如何影响利润?
该公司去年有一些不同寻常的项目将利润提高了1700万港元,这一事实很可能在一定程度上解释了其应计比率如此之低的原因。我们不能否认,更高的利润通常会让我们保持乐观,但如果利润是可持续的,我们更愿意这样做。当我们分析了数千家上市公司的数据时,我们发现,在给定的一年中,不寻常的项目往往会带来提振不第二年又重复了一遍。考虑到这个名字,这并不令人惊讶。与截至2022年3月的利润相比,爱德万斯国际控股公司的异常项目做出了相当大的贡献。在其他条件不变的情况下,这可能会使法定利润成为衡量潜在盈利能力的糟糕指标。
我们对爱德万斯国际控股公司利润表现的看法
综上所述,爱德万斯国际控股公司从不寻常的项目中获得了不错的利润提振,但无法将其账面利润与自由现金流相匹配。考虑到这一切,我们认为爱德万斯国际控股公司的利润可能给人一种过于慷慨的印象,表明其可持续的盈利水平。有鉴于此,如果你想对公司做更多的分析,了解其中的风险是至关重要的。当我们做研究时,我们发现埃德万斯国际控股公司的3个警告信号(1让我们有点不舒服!)我们认为这值得你的全力关注。
我们对爱德万斯国际控股公司的审查集中在某些因素上,这些因素可以使其收益看起来比实际情况更好。在此基础上,我们对此持怀疑态度。但还有很多其他方式可以让你了解一家公司的看法。一些人认为,高股本回报率是高质量企业的良好标志。所以你可能想看看这个免费拥有高股本回报率的公司的集合,或内部人士正在购买的这份股票清单。
对这篇文章有什么反馈吗?担心内容吗? 保持联系直接与我们联系。或者,也可以给编辑组发电子邮件,地址是implywallst.com。
本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。
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moomoo是Moomoo Technologies Inc.公司提供的金融信息和交易应用程序。
在美国,moomoo上的投资产品和服务由Moomoo Financial Inc.提供,一家受美国证券交易委员会(SEC)监管的持牌主体。 Moomoo Financial Inc.是金融业监管局(FINRA)和证券投资者保护公司(SIPC)的成员。
在新加坡,moomoo上的投资产品和服务是通过Moomoo Financial Singapore Pte. Ltd.提供,该公司受新加坡金融管理局(MAS)监管(牌照号码︰CMS101000) ,持有资本市场服务牌照 (CMS) ,持有财务顾问豁免(Exempt Financial Adviser)资质。本内容未经新加坡金融管理局的审查。
在澳大利亚,moomoo上的金融产品和服务是通过Futu Securities (Australia) Ltd提供,该公司是受澳大利亚证券和投资委员会(ASIC)监管的澳大利亚金融服务许可机构(AFSL No. 224663)。请阅读并理解我们的《金融服务指南》、《条款与条件》、《隐私政策》和其他披露文件,这些文件可在我们的网站 https://www.moomoo.com/au中获取。
在加拿大,通过moomoo应用提供的仅限订单执行的券商服务由Moomoo Financial Canada Inc.提供,并受加拿大投资监管机构(CIRO)监管。
在马来西亚,moomoo上的投资产品和服务是通过Moomoo Securities Malaysia Sdn. Bhd. 提供,该公司受马来西亚证券监督委员会(SC)监管(牌照号码︰eCMSL/A0397/2024) ,持有资本市场服务牌照 (CMSL) 。本内容未经马来西亚证券监督委员会的审查。
Moomoo Technologies Inc., Moomoo Financial Inc., Moomoo Financial Singapore Pte. Ltd., Futu Securities (Australia) Ltd, Moomoo Financial Canada Inc.,和Moomoo Securities Malaysia Sdn. Bhd.是关联公司。
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