The recent earnings posted by Dragon Rise Group Holdings Limited (HKG:6829) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.
Check out our latest analysis for Dragon Rise Group Holdings
SEHK:6829 Earnings and Revenue History December 15th 2022
A Closer Look At Dragon Rise Group Holdings' Earnings
Many investors haven't heard of the accrual ratio from cashflow, but it is actually a useful measure of how well a company's profit is backed up by free cash flow (FCF) during a given period. The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. This ratio tells us how much of a company's profit is not backed by free cashflow.
Therefore, it's actually considered a good thing when a company has a negative accrual ratio, but a bad thing if its accrual ratio is positive. While it's not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future".
For the year to September 2022, Dragon Rise Group Holdings had an accrual ratio of -0.25. Therefore, its statutory earnings were very significantly less than its free cashflow. To wit, it produced free cash flow of HK$56m during the period, dwarfing its reported profit of HK$16.1m. Dragon Rise Group Holdings' free cash flow improved over the last year, which is generally good to see. However, we can see that a recent tax benefit, along with unusual items, have impacted its statutory profit, and therefore its accrual ratio.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Dragon Rise Group Holdings.
The Impact Of Unusual Items On Profit
While the accrual ratio might bode well, we also note that Dragon Rise Group Holdings' profit was boosted by unusual items worth HK$2.4m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Dragon Rise Group Holdings doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.
An Unusual Tax Situation
In addition to the notable accrual ratio, we can see that Dragon Rise Group Holdings received a tax benefit of HK$4.5m. This is of course a bit out of the ordinary, given it is more common for companies to be paying tax than receiving tax benefits! We're sure the company was pleased with its tax benefit. And since it previously lost money, it may well simply indicate the realisation of past tax losses. However, the devil in the detail is that these kind of benefits only impact in the year they are booked, and are often one-off in nature. Assuming the tax benefit is not repeated every year, we could see its profitability drop noticeably, all else being equal. While we think it's good that the company has booked a tax benefit, it does mean that there's every chance the statutory profit will come in a lot higher than it would be if the income was adjusted for one-off factors.
Our Take On Dragon Rise Group Holdings' Profit Performance
Summing up, Dragon Rise Group Holdings' accrual ratio suggests that its statutory earnings are well matched by free cash flow while its unusual items and tax benefit is boosted profit in a way that may not be sustained. Having considered these factors, we don't think Dragon Rise Group Holdings' statutory profits give an overly harsh view of the business. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 3 warning signs we've spotted with Dragon Rise Group Holdings (including 1 which is significant).
In this article we've looked at a number of factors that can impair the utility of profit numbers, as a guide to a business. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.
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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.
最近发布的收益为龙升集团控股有限公司(HKG:6829)表现稳健,但股价走势没有我们预期的那么大。然而,法定利润数字并不能说明全部情况,我们发现了一些可能引起股东关注的因素。
查看我们对龙升集团控股的最新分析
联交所:6829盈利及收入历史2022年12月15日
Dragon Rise Group Holdings的收益细看
许多投资者都没有听说过现金流应计比率但它实际上是衡量一家公司在给定时期内自由现金流(FCF)支持公司利润的程度的有用指标。应计制比率从给定期间的利润中减去FCF,然后将结果除以该时间段内公司的平均运营资产。这个比率告诉我们,一家公司的利润中有多少不是由自由现金流支持的。
因此,当一家公司的应计比率为负时,它实际上被认为是一件好事,但如果它的应计比率为正,那就是一件坏事。虽然应计比率为正并不是问题,这表明非现金利润达到了一定的水平,但高的应计比率可以说是一件坏事,因为它表明账面利润与现金流不匹配。引用勒维伦和雷苏泰克2014年的一篇论文,“应计利润较高的公司未来的利润往往较低”。
在截至2022年9月的一年中,Dragon Rise Group Holdings的应计比率为-0.25。因此,其法定收益非常显著地低于其自由现金流。换言之,该公司在此期间产生了5600万港元的自由现金流,令其公布的1610万港元利润相形见绌。Dragon Rise Group Holdings的自由现金流在过去一年有所改善,总体来说是好的。然而,我们可以看到,最近的一项税收优惠,以及不寻常的项目,影响了其法定利润,从而影响了其应计比率。
注:我们总是建议投资者检查资产负债表的实力。点击此处进入我们对龙瑞集团控股的资产负债表分析。
异常项目对利润的影响
虽然应计比率可能是个好兆头,但我们亦注意到,龙升集团控股的利润在过去12个月受到价值240万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。我们对全球大多数上市公司进行了统计,不寻常的项目在性质上是一次性的,这是非常常见的。考虑到这个名字,这并不令人惊讶。如果龙升集团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,我们预计该公司今年的利润将会下降。
不同寻常的税务情况
除了显著的应计提比率外,我们还可以看到龙升集团控股获得了450万港元的税收优惠。这当然有点不寻常,因为公司交税比享受税收优惠更常见!我们确信该公司对其税收优惠感到满意。而且,由于它之前亏损,这很可能只是表明它实现了过去的税收亏损。然而,细节中的魔鬼是,这些福利只在预订的那一年影响,而且往往是一次性的。假设税收优惠不是每年重复,我们可以看到,在其他条件不变的情况下,其盈利能力显著下降。虽然我们认为该公司获得了税收优惠是件好事,但这确实意味着,法定利润很有可能会比收入经一次性因素调整后的水平高出很多。
我们对龙瑞集团控股公司盈利表现的看法
综上所述,Dragon Rise Group Holdings的应计比率表明,其法定收益与自由现金流很好地匹配,而其不寻常的项目和税收优惠以一种可能无法持续的方式提振了利润。考虑到这些因素,我们不认为龙升集团控股的法定利润对该业务的看法过于苛刻。考虑到这一点,除非我们对风险有透彻的了解,否则我们不会考虑投资股票。为此,您应该了解3个警示标志我们已经发现了Dragon Rise Group Holdings(包括1家意义重大的公司)。
在这篇文章中,我们研究了一些因素,这些因素可能会削弱利润数字作为企业指南的效用。但如果你有能力将注意力集中在细枝末节上,总会有更多的东西需要发现。一些人认为,高股本回报率是高质量企业的良好标志。虽然这可能需要为您做一些研究,但您可能会发现免费拥有高股本回报率的公司的集合,或者是内部人士购买的有用的股票清单。
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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。