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
![earnings-and-revenue-history](https://usnewsfile.futunn.com/pic/0-14447563-0-68dbe9a3608059f9f22c7f0c21612dc4.png/big)
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.
股東們似乎並不太擔心上海物資貿易有限公司(上海證券交易所:900927)盈利疲軟。我們做了一些分析,發現了法定利潤數字下的一些相關細節。
查看我們對上海材料貿易的最新分析
![earnings-and-revenue-history](https://usnewsfile.futunn.com/pic/0-14447563-0-68dbe9a3608059f9f22c7f0c21612dc4.png/big)
上海證券交易所:900927收益和收入歷史2022年9月6日
細看上海物資貿易的盈利情況
衡量一家公司將利潤轉換為自由現金流(FCF)的程度的一個關鍵財務比率是應計比率。為了得到應計比率,我們首先從一個時期的利潤中減去FCF,然後用這個數字除以該時期的平均運營資產。你可以把來自現金流的應計比率看作是‘非FCF利潤率’。
因此,當一家公司的應計比率為負時,它實際上被認為是一件好事,但如果它的應計比率為正,那就是一件壞事。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”。
截至2022年6月的12個月內,上海材料貿易的應計比率為0.32。因此,我們知道它的自由現金流明顯低於其法定利潤,這引發了人們對這個利潤數字到底有多大用處的疑問。在過去的12個月裏,它實際上有負面自由現金流,儘管其利潤為9070萬元,但仍流出7400萬元。我們看到一年前的FCF是2.28億加元,所以上海材料交易至少在過去能夠產生正的FCF。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。對股東來説,好消息是,上海材料貿易去年的應計比率要好得多,因此今年的糟糕讀數可能只是利潤與FCF短期錯配的一個例子。因此,一些股東可能希望在本年度實現更強勁的現金轉換。
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上海材料貿易的資產負債表分析。
異常項目對利潤的影響
該公司去年有一些不尋常的項目使利潤增加了1100萬加元,這一事實可能在某種程度上解釋了為什麼它的應計比率如此之低。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。當我們分析了數千家上市公司的數據時,我們發現,在給定的一年中,不尋常的項目往往會帶來提振不第二年又重複了一遍。畢竟,這正是會計術語所暗示的。我們可以看到,在截至2022年6月的一年中,上海物資貿易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。
我們對上海物資貿易盈利表現的看法
上海材料貿易的應計比率較低,但它的利潤確實得到了不尋常項目的提振。基於上述原因,我們認為,敷衍地看一眼上海材料貿易的法定利潤,可能會讓它看起來比實際情況更好。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1上海物資交易警示標誌你應該知道。
我們對上海材料貿易的調查集中在某些因素上,這些因素可能會讓它的收益看起來比實際情況更好。在此基礎上,我們對此持懷疑態度。但還有很多其他方式可以讓你瞭解一家公司的看法。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。