Shareholders didn't appear too concerned by Shanghai Material Trading Co., Ltd.'s (SHSE:900927) weak earnings. We did some analysis and found some concerning details beneath the statutory profit number.
View our latest analysis for Shanghai Material Trading
SHSE:900927 Earnings and Revenue History September 6th 2022
A Closer Look At Shanghai Material Trading's Earnings
One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the accrual ratio. To get the accrual ratio we first subtract FCF from profit for a period, and then divide that number by the average operating assets for the period. 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. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future".
Over the twelve months to June 2022, Shanghai Material Trading recorded an accrual ratio of 0.32. Therefore, we know that it's free cashflow was significantly lower than its statutory profit, raising questions about how useful that profit figure really is. In the last twelve months it actually had negative free cash flow, with an outflow of CN¥74m despite its profit of CN¥90.7m, mentioned above. We saw that FCF was CN¥228m a year ago though, so Shanghai Material Trading has at least been able to generate positive FCF in the past. 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. The good news for shareholders is that Shanghai Material Trading'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. As a result, some shareholders may be looking for stronger cash conversion in the current year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai Material Trading.
The Impact Of Unusual Items On Profit
The fact that the company had unusual items boosting profit by CN¥11m, in the last year, probably goes some way to explain why its accrual ratio was so weak. 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. We can see that Shanghai Material Trading's positive unusual items were quite significant relative to its profit in the year to June 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 Shanghai Material Trading's Profit Performance
Shanghai Material Trading had a weak accrual ratio, but its profit did receive a boost from unusual items. For the reasons mentioned above, we think that a perfunctory glance at Shanghai Material Trading's statutory profits might make it look better than it really is on an underlying level. 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 1 warning sign for Shanghai Material Trading you should know about.
Our examination of Shanghai Material Trading has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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. 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.
股东们似乎并不太担心上海物资贸易有限公司(上海证券交易所:900927)盈利疲软。我们做了一些分析,发现了法定利润数字下的一些相关细节。
查看我们对上海材料贸易的最新分析
上海证券交易所:900927收益和收入历史2022年9月6日
细看上海物资贸易的盈利情况
衡量一家公司将利润转换为自由现金流(FCF)的程度的一个关键财务比率是应计比率。为了得到应计比率,我们首先从一个时期的利润中减去FCF,然后用这个数字除以该时期的平均运营资产。你可以把来自现金流的应计比率看作是‘非FCF利润率’。
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”。
截至2022年6月的12个月内,上海材料贸易的应计比率为0.32。因此,我们知道它的自由现金流明显低于其法定利润,这引发了人们对这个利润数字到底有多大用处的疑问。在过去的12个月里,它实际上有负面自由现金流,尽管其利润为9070万元,但仍流出7400万元。我们看到一年前的FCF是2.28亿加元,所以上海材料交易至少在过去能够产生正的FCF。然而,这并不是需要考虑的全部问题。应计比率反映了不寻常项目对法定利润的影响,至少在一定程度上是这样。对股东来说,好消息是,上海材料贸易去年的应计比率要好得多,因此今年的糟糕读数可能只是利润与FCF短期错配的一个例子。因此,一些股东可能希望在本年度实现更强劲的现金转换。
注:我们总是建议投资者检查资产负债表的实力。点击此处查看我们对上海材料贸易的资产负债表分析。
异常项目对利润的影响
该公司去年有一些不寻常的项目使利润增加了1100万加元,这一事实可能在某种程度上解释了为什么它的应计比率如此之低。我们不能否认,更高的利润通常会让我们保持乐观,但如果利润是可持续的,我们更愿意这样做。当我们分析了数千家上市公司的数据时,我们发现,在给定的一年中,不寻常的项目往往会带来提振不第二年又重复了一遍。毕竟,这正是会计术语所暗示的。我们可以看到,在截至2022年6月的一年中,上海物资贸易的积极异常项目与其利润相比相当重要。在其他条件不变的情况下,这可能会使法定利润成为衡量潜在盈利能力的糟糕指标。
我们对上海物资贸易盈利表现的看法
上海材料贸易的应计比率较低,但它的利润确实得到了不寻常项目的提振。基于上述原因,我们认为,敷衍地看一眼上海材料贸易的法定利润,可能会让它看起来比实际情况更好。因此,如果你想更深入地研究这只股票,考虑它面临的任何风险是至关重要的。每家公司都有风险,我们已经发现1上海物资交易警示标志你应该知道。
我们对上海材料贸易的调查集中在某些因素上,这些因素可能会让它的收益看起来比实际情况更好。在此基础上,我们对此持怀疑态度。但还有很多其他方式可以让你了解一家公司的看法。例如,许多人认为高股本回报率是有利的商业经济指标,而另一些人则喜欢“跟着钱走”,寻找内部人士正在买入的股票。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。