Pacific Radiance Ltd.'s (SGX:RXS) solid earnings report last week was underwhelming to investors. We think that they may be worried about something else, so we did some analysis and found that investors have noticed some soft numbers underlying the profit.
See our latest analysis for Pacific Radiance
SGX:RXS Earnings and Revenue History November 21st 2022
Examining Cashflow Against Pacific Radiance's Earnings
As finance nerds would already know, the accrual ratio from cashflow is a key measure for assessing how well a company's free cash flow (FCF) matches its profit. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. This ratio tells us how much of a company's profit is not backed by free cashflow.
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.
Over the twelve months to September 2022, Pacific Radiance recorded an accrual ratio of 4.22. Ergo, its free cash flow is significantly weaker than its profit. As a general rule, that bodes poorly for future profitability. In fact, it had free cash flow of US$4.3m in the last year, which was a lot less than its statutory profit of US$330.3m. Pacific Radiance shareholders will no doubt be hoping that its free cash flow bounces back next year, since it was down over the last twelve months. Unfortunately for shareholders, the company has also been issuing new shares, diluting their share of future earnings. The good news for shareholders is that Pacific Radiance's accrual ratio was much better last year, so this year's poor reading might simply be a case of a short term mismatch between profit and FCF. Shareholders should look for improved cashflow relative to profit in the current year, if that is indeed the case.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Pacific Radiance.
In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Pacific Radiance increased the number of shares on issue by 530% over the last twelve months by issuing new shares. That means its earnings are split among a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. Check out Pacific Radiance's historical EPS growth by clicking on this link.
A Look At The Impact Of Pacific Radiance's Dilution On Its Earnings Per Share (EPS)
Pacific Radiance was losing money three years ago. The good news is that profit was up 3,274% in the last twelve months. But EPS was less impressive, up only 2,109% in that time. So you can see that the dilution has had a fairly significant impact on shareholders.
In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if Pacific Radiance can grow EPS persistently. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.
Our Take On Pacific Radiance's Profit Performance
As it turns out, Pacific Radiance couldn't match its profit with cashflow and its dilution means that earnings per share growth is lagging net income growth. On reflection, the above-mentioned factors give us the strong impression that Pacific Radiance'sunderlying earnings power is not as good as it might seem, based on the statutory profit numbers. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that Pacific Radiance is showing 3 warning signs in our investment analysis and 2 of those shouldn't be ignored...
In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. 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.
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.
太平洋輻射有限公司。”s(新加坡證券交易所股票代碼:RXS)上週穩健的收益報告令投資者望而卻步。我們認爲他們可能會擔心其他問題,因此我們進行了一些分析,發現投資者已經注意到利潤背後的一些疲軟數字。
查看我們對太平洋輻射度的最新分析
新加坡證券交易所:RXS 收益和收入歷史記錄 2022年11月21日
根據Pacific Radiance的收益研究現金流
正如財務愛好者已經知道的那樣,現金流的應計比率是評估公司自由現金流(FCF)與其利潤相匹配程度的關鍵指標。簡而言之,該比率從淨利潤中減去FCF,然後將該數字除以公司在此期間的平均運營資產。這個比率告訴我們公司有多少利潤沒有自由現金流支持。
這意味着負應計比率是一件好事,因爲它表明該公司帶來的自由現金流超出了其利潤所暗示的範圍。儘管應計比率高於零並不令人擔憂,但我們確實認爲,當公司的應計比率相對較高時,值得注意。那是因爲一些學術研究表明,高應計比率往往會導致利潤下降或利潤增長放緩。
在截至2022年9月的十二個月中,太平洋輻射記錄的應計比率爲4.22。因此,其自由現金流明顯低於其利潤。通常,這對未來的盈利能力來說是個壞兆頭。實際上,它去年的自由現金流爲430萬美元,遠低於其3.303億美元的法定利潤。毫無疑問,Pacific Radiance的股東們將希望其自由現金流能夠在明年反彈,因爲在過去的十二個月中一直處於下降狀態。對於股東來說,不幸的是,該公司也一直在發行新股,稀釋了他們在未來收益中所佔的份額。對股東來說,好消息是,Pacific Radiance去年的應計比率要好得多,因此今年的糟糕數據可能只是利潤與FCF之間短期不匹配的情況。如果確實如此,股東應尋求在本年度的現金流相對於利潤的改善。
注意:我們始終建議投資者檢查資產負債表的實力。點擊此處查看我們對Pacific Radiance的資產負債表分析。
爲了了解每股回報的可能性,必須考慮公司在多大程度上稀釋了股東。實際上,Pacific Radiance通過發行新股,在過去十二個月中將已發行股票數量增加了530%。這意味着其收益將分配給更多的股票。每股收益等每股指標可以幫助我們了解實際股東從公司的利潤中受益的程度,而淨收入水平則使我們能夠更好地了解公司的絕對規模。點擊此鏈接,查看Pacific Radiance的歷史每股收益增長。
看看Pacific Radiance的稀釋對其每股收益(EPS)的影響
三年前,Pacific Radiance虧損了。好消息是,在過去的十二個月中,利潤增長了3,274%。但是每股收益並不那麼令人印象深刻,當時僅增長了2,109%。因此,你可以看到稀釋對股東產生了相當大的影響。
從長遠來看,收益 每股 增長應該帶來股價的增長。因此,如果Pacific Radiance能夠持續增長每股收益,這對股東來說肯定是利好的。但是,如果其利潤增加而每股收益保持不變(甚至下降),那麼股東可能看不到太多好處。出於這個原因,你可以說從長遠來看,每股收益比淨收入更重要,前提是目標是評估公司的股價是否可能上漲。
我們對Pacific Radiance盈利表現的看法
事實證明,Pacific Radiance無法將其利潤與現金流相匹配,其稀釋意味着每股收益的增長落後於淨收入的增長。經過反思,上述因素給我們留下了強烈的印象,即根據法定利潤數字,Pacific Radiance的潛在盈利能力並不像看起來那樣好。請記住,在分析股票時,值得注意所涉及的風險。請注意,Pacific Radiance在我們的投資分析中顯示了3個警告信號,其中2個不容忽視...
在本文中,我們研究了許多可能削弱利潤數字效用的因素,我們對此持謹慎態度。但是,還有很多其他方法可以告知你對公司的看法。例如,許多人認爲高股本回報率表明商業經濟狀況良好,而另一些人則喜歡 “追隨資金”,尋找內部人士正在購買的股票。因此,你可能希望看到這批擁有高股本回報率的免費公司,或者這份內部人士正在購買的股票清單。
對這篇文章有反饋嗎?對內容感到擔憂?直接聯繫我們。 或者,給編輯團隊 (at) simplywallst.com 發送電子郵件。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。