Strong Petrochemical Holdings Limited's (HKG:852) solid earnings announcement recently didn't do much to the stock price. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.
View our latest analysis for Strong Petrochemical Holdings
SEHK:852 Earnings and Revenue History September 2nd 2022
Zooming In On Strong Petrochemical 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. To get the accrual ratio we first subtract FCF from profit for a period, and then divide that number by the average operating assets for the period. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'.
That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. 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.
For the year to June 2022, Strong Petrochemical Holdings had an accrual ratio of -0.20. Therefore, its statutory earnings were very significantly less than its free cashflow. In fact, it had free cash flow of HK$283m in the last year, which was a lot more than its statutory profit of HK$25.3m. Strong Petrochemical Holdings shareholders are no doubt pleased that free cash flow improved over the last twelve months. Having said that, there is more to the story. The accrual ratio is reflecting the impact of unusual items on statutory profit, at least in part.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Strong Petrochemical Holdings.
How Do Unusual Items Influence Profit?
While the accrual ratio might bode well, we also note that Strong Petrochemical Holdings' profit was boosted by unusual items worth HK$9.7m in the last twelve months. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. And that's as you'd expect, given these boosts are described as 'unusual'. If Strong Petrochemical Holdings doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.
Our Take On Strong Petrochemical Holdings' Profit Performance
In conclusion, Strong Petrochemical Holdings' accrual ratio suggests its statutory earnings are of good quality, but on the other hand the profits were boosted by unusual items. Based on these factors, we think that Strong Petrochemical Holdings' profits are a reasonably conservative guide to its underlying profitability. So while earnings quality is important, it's equally important to consider the risks facing Strong Petrochemical Holdings at this point in time. Every company has risks, and we've spotted 3 warning signs for Strong Petrochemical Holdings (of which 1 is significant!) you should know about.
Our examination of Strong Petrochemical Holdings has focussed on certain factors that can make its earnings look better than they are. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.
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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.
斯特朗石化控股有限公司(HKG:852)最近公布的稳健业绩并没有对股价起到多大作用。我们的分析表明,股东可能在收益报告中遗漏了一些积极的潜在因素。
查看我们对Strong PetroChemical Holdings的最新分析
联交所:852盈利及收入历史2022年9月2日
放大石化控股公司强劲的收益
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。为了得到应计比率,我们首先从一个时期的利润中减去FCF,然后用这个数字除以该时期的平均运营资产。你可以把来自现金流的应计比率看作是‘非FCF利润率’。
这意味着负的应计比率是一件好事,因为它表明该公司带来的自由现金流比其利润所暗示的要多。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6月的一年中,Strong PetroChemical Holdings的应计比率为-0.20。因此,其法定收益非常显著地低于其自由现金流。事实上,该公司去年的自由现金流为2.83亿港元,远高于其2530万港元的法定利润。强大的石化控股公司股东无疑对自由现金流在过去12个月中的改善感到高兴。话虽如此,故事中还有更多的东西。应计比率反映了不寻常项目对法定利润的影响,至少在一定程度上是这样。
注:我们总是建议投资者检查资产负债表的实力。点击此处查看我们对Strong PetroChemical Holdings的资产负债表分析。
不寻常的项目如何影响利润?
虽然应计比率可能是个好兆头,但我们也注意到,强劲的石化控股公司的利润在过去12个月受到价值970万港元的不寻常项目的提振。虽然我们喜欢看到利润增加,但当不寻常的项目做出了很大贡献时,我们往往会更加谨慎。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。考虑到这些提振被描述为“不寻常的”,这正如你所预期的那样。如果强大的石化控股公司没有看到这种贡献再次出现,那么在其他条件相同的情况下,我们预计其利润在本年度将下降。
我们对强劲的石化控股公司利润表现的看法
总而言之,石化控股强劲的应计比率表明其法定收益质量良好,但另一方面利润受到不寻常项目的提振。基于这些因素,我们认为,强劲的石化控股公司的利润是其潜在盈利能力的一个相当保守的指南。因此,尽管盈利质量很重要,但考虑到强大的石化控股公司目前面临的风险也同样重要。每家公司都有风险,我们已经发现石化控股强势的3个警告信号(其中1个是重要的!)你应该知道。
我们对强大的石化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。但还有很多其他方式可以让你了解一家公司的看法。例如,许多人认为高股本回报率是有利的商业经济指标,而另一些人则喜欢“跟着钱走”,寻找内部人士正在买入的股票。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。
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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。