The market seemed underwhelmed by the solid earnings posted by Keen Ocean International Holding Limited (HKG:8070) recently. Our analysis suggests that there are some reasons for hope that investors should be aware of.
SEHK:8070 Earnings and Revenue History May 3rd 2024
Zooming In On Keen Ocean International Holding's 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. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'.
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. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking.
For the year to December 2023, Keen Ocean International Holding had an accrual ratio of -0.59. That implies it has very good cash conversion, and that its earnings in the last year actually significantly understate its free cash flow. In fact, it had free cash flow of HK$71m in the last year, which was a lot more than its statutory profit of HK$17.2m. Keen Ocean International Holding's free cash flow improved over the last year, which is generally good to see. 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 Keen Ocean International Holding.
How Do Unusual Items Influence Profit?
Surprisingly, given Keen Ocean International Holding's accrual ratio implied strong cash conversion, its paper profit was actually boosted by HK$2.8m in unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Keen Ocean International Holding 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 Keen Ocean International Holding's Profit Performance
In conclusion, Keen Ocean International Holding's accrual ratio suggests its statutory earnings are of good quality, but on the other hand the profits were boosted by unusual items. Considering all the aforementioned, we'd venture that Keen Ocean International Holding's profit result is a pretty good guide to its true profitability, albeit a bit on the conservative side. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that Keen Ocean International Holding is showing 2 warning signs in our investment analysis and 1 of those can't be ignored...
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 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. 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.
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.
Keen Ocean International Holding Limited(HKG:8070)が最近公表した堅調な収益に対して市場はあまり期待していないようです。当社の分析によると、投資家が気づくべき希望の理由がいくつかあります。
2023年12月期において、Keen Ocean International Holdingの貸借対照表に載っていないキャッシュフローが非常に高く、昨年の収益は実際にはフリーキャッシュフローを大幅に低く評価していることが示唆された利益剰余金比率は-0.59でした。実際、昨年のフリーキャッシュフローはHK $71mであり、法定利益のHK $17.2mよりずっと多かったです。Keen Ocean International Holdingのフリーキャッシュフローは昨年より改善しましたが、すべてを考慮するにはそれだけでは十分ではありません。異常な項目が法定利益に影響を与えたことがわかります。したがって、利益剰余金比率も影響を受けています。
注意:常に投資家は貸借対照表の強さを確認することをお勧めします。Keen Ocean International Holdingの貸借対照表分析に移動するには、ここをクリックしてください。
異常なアイテムが利益にどのように影響するか?
驚くべきことに、Keen Ocean International Holdingの利益剰余金比率が強いキャッシュフロー変換を示していたにもかかわらず、その紙上利益は実際には異常な項目によってHK$2.8m増加しました。高い利益を持つことはいつでもうれしいことですが、異常な項目からの大きな貢献はときに私たちの熱意を抑えます。私たちは、世界のほとんどの上場企業の大多数を分析したところ、重要な異常な項目はしばしば繰り返されないことが分かりました。そして、結局のところ、それこそが会計用語の意味するところです。Keen Ocean International Holdingがその貢献を繰り返さない場合、それ以外のすべてが同じであれば、現在の年度の利益が低下することが予想されます。
Keen Ocean International Holdingの利益パフォーマンスに対する私たちの見方
結論として、Keen Ocean International Holdingの利益剰余金比率は、法定の利益が良質であることを示唆していますが、一方で利益は異常な項目によって増加しました。上記すべてを考慮すると、私たちはKeen Ocean International Holdingの利益結果が真の収益性をかなりの程度で示していると考えますが、やや保守的な面があります。これを念頭に置いて、リスクを徹底的に理解しなければ株式投資を検討しないでください。Keen Ocean International Holdingは、投資分析で2つの警告サインを示しており、そのうち1つは無視できません。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。