B & S International Holdings Ltd.'s (HKG:1705) robust recent earnings didn't do much to move the stock. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.
See our latest analysis for B & S International Holdings
SEHK:1705 Earnings and Revenue History December 22nd 2022
Examining Cashflow Against B & S International 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. 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 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".
B & S International Holdings has an accrual ratio of -0.54 for the year to September 2022. That indicates that its free cash flow quite significantly exceeded its statutory profit. In fact, it had free cash flow of HK$79m in the last year, which was a lot more than its statutory profit of HK$14.7m. B & S International Holdings' free cash flow improved over the last year, which is generally good to see. However, that's not all there is to consider. 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 B & S International Holdings.
How Do Unusual Items Influence Profit?
While the accrual ratio might bode well, we also note that B & S International Holdings' profit was boosted by unusual items worth HK$12m in the last twelve months. 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that B & S International Holdings' positive unusual items were quite significant relative to its profit in the year to September 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 B & S International Holdings' Profit Performance
In conclusion, B & S International Holdings' accrual ratio suggests its statutory earnings are of good quality, but on the other hand the profits were boosted by unusual items. Given the contrasting considerations, we don't have a strong view as to whether B & S International Holdings's profits are an apt reflection of its underlying potential for profit. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 4 warning signs for B & S International Holdings (of which 1 is a bit unpleasant!) you should know about.
Our examination of B & S International Holdings has focussed on certain factors that can make its earnings look better than they are. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.
B&S國際控股有限公司(HKG:1705)近期強勁的收益對股價影響不大。我們認為,這是由於投資者將目光投向了法定利潤之外,而關注的是他們所看到的。
查看我們對B&S國際控股公司的最新分析
聯交所:2022年12月22日1705年度盈利及收入紀錄
考察現金流與B&S國際控股公司收益的關係
許多投資者都沒有聽説過現金流應計比率但它實際上是衡量一家公司在給定時期內自由現金流(FCF)支持公司利潤的程度的有用指標。簡單地説,這個比率是從淨利潤中減去FCF,然後用這個數字除以該公司在此期間的平均運營資產。這個比率告訴我們,一家公司的利潤中有多少不是由自由現金流支持的。
這意味着負的應計比率是一件好事,因為它表明該公司帶來的自由現金流比其利潤所暗示的要多。雖然應計比率為正並不是問題,這表明非現金利潤達到了一定的水平,但高的應計比率可以説是一件壞事,因為它表明賬面利潤與現金流不匹配。引用勒維倫和雷蘇泰克2014年的一篇論文,“應計利潤較高的公司未來的利潤往往較低”。
在截至2022年9月的一年中,B&S國際控股的應計比率為-0.54。這表明它的自由現金流大大超過了它的法定利潤。事實上,該公司去年的自由現金流為7900萬港元,遠高於其1470萬港元的法定利潤。去年,B&S國際控股的自由現金流有所改善,這一點總體上是好的。然而,這並不是需要考慮的全部問題。應計比率反映了不尋常項目對法定利潤的影響,至少在一定程度上是這樣。
注:我們總是建議投資者檢查資產負債表的實力。點擊此處查看我們對B&S國際控股公司的資產負債表分析。
不尋常的項目如何影響利潤?
雖然應計比率可能是個好兆頭,但我們也注意到,過去12個月,B&S國際控股的利潤受到價值1200萬港元的不尋常項目的提振。我們不能否認,更高的利潤通常會讓我們保持樂觀,但如果利潤是可持續的,我們更願意這樣做。當我們分析全球絕大多數上市公司時,我們發現重大的不尋常項目往往不會重複。考慮到這個名字,這並不令人驚訝。我們可以看到,在截至2022年9月的一年中,B&S國際控股的積極異常項目與其利潤相比相當重要。在其他條件不變的情況下,這可能會使法定利潤成為衡量潛在盈利能力的糟糕指標。
我們對B&S國際控股公司利潤表現的看法
總而言之,B&S International Holdings的應計比率表明其法定收益質量良好,但另一方面,利潤受到不尋常項目的提振。考慮到這兩種截然不同的考慮,對於B&S國際控股的利潤是否恰當地反映了其潛在的盈利潛力,我們並沒有強烈的看法。因此,如果你想更深入地研究這隻股票,考慮它面臨的任何風險是至關重要的。每家公司都有風險,我們已經發現B&S國際控股公司的4個警告信號(其中1個有點不愉快!)你應該知道。
我們對B&S國際控股公司的審查集中在某些因素上,這些因素可以使其收益看起來比實際情況更好。但如果你有能力將注意力集中在細枝末節上,總會有更多的東西需要發現。例如,許多人認為高股本回報率是有利的商業經濟指標,而另一些人則喜歡“跟着錢走”,尋找內部人士正在買入的股票。雖然這可能需要為您做一些研究,但您可能會發現免費擁有高股本回報率的公司的集合,或者是內部人士購買的有用的股票清單。
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本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。