$BrasilAgro (LND.US)$It is a Brazilian company listed on the...

Gross profit margin has risen in volatility over the past five years, falling from 28% to 55% to 41%, and then to 71% in 2021, with obvious short periodicity. The return on equity rose from 4% to 21.6%, then fell to 12%, and rose to 19.2% in 2021.

Over the past five years, revenue has maintained relatively rapid growth. Except for a 13% decline in 2020, operating profit has grown rapidly in the other four years, with an average growth rate of 55% in the past three years. The net profit curve is similar to operating profit, with an average growth rate of 36% in the past three years, which is also quite fast. Earnings per share have grown at an average rate of 24.7% over the past three years.

The cumulative revenue and net profit in the first three quarters of 2022 increased by 139% and 158% respectively, and the growth rate is still maintained, but considering the cycle of about two years, we should pay attention to the average when calculating.

The income statement shows that the company has no interest burden, but there are more other expenses in the past two years, accounting for 37% of the operating profit, mainly for the sale of securities.

What is interesting is that the company carried out costly equity financing without interest burden, increasing the number of new shares by 871 million, which is a suspicious place. Companies with low interest burdens are usually more likely to borrow than equity financing. I wonder if Brazil is a special case.

Over the past five years, the asset-liability ratio has increased from 24.4% to 45%, equity financing in 2021, and then gradually dropped to 29.3%.

Short-term and long-term borrowing has been increasing rapidly over the past five years. After equity financing, short-term borrowing fell by half, while long-term borrowing fell briefly and then rose to near pre-financing levels, indicating that there is a problem with the company's ability to generate cash on its own.

In the first three quarters of 2022, accounts receivable increased by 270 million and inventory increased by 210 million, totaling 480 million, while the cumulative net profit in the first three quarters was only 489 million, which is equivalent to profits going into receivables and inventories.

Over the past five years, net operating and net investment have been basically offset, and no shareholder surplus has been generated.

The current price-to-earnings ratio is 5.53 and the price-to-earnings ratio is TTM 3.5, which is low enough in terms of valuation. But given the abnormal performance of cash flow, we can watch for a few more quarters.