Despite posting strong earnings, Shanghai Kai Kai Industry Company Limited's (SHSE:900943) stock didn't move much over the last week. We decided to have a deeper look, and we believe that investors might be worried about several concerning factors that we found.
Check out our latest analysis for Shanghai Kai Kai Industry
SHSE:900943 Earnings and Revenue History September 7th 2022
A Closer Look At Shanghai Kai Kai Industry'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. This ratio tells us how much of a company's profit is not backed by free cashflow.
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.
Shanghai Kai Kai Industry has an accrual ratio of 1.21 for the year to June 2022. As a general rule, that bodes poorly for future profitability. And indeed, during the period the company didn't produce any free cash flow whatsoever. Even though it reported a profit of CN¥44.6m, a look at free cash flow indicates it actually burnt through CN¥315m in the last year. We saw that FCF was CN¥63m a year ago though, so Shanghai Kai Kai Industry has at least been able to generate positive FCF in the past. Having said that, there is more to the story. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio. The good news for shareholders is that Shanghai Kai Kai Industry'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. Shareholders should look for improved cashflow relative to profit in the current year, if that is indeed the case.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai Kai Kai Industry.
The Impact Of Unusual Items On Profit
The fact that the company had unusual items boosting profit by CN¥30m, in the last year, probably goes some way to explain why its accrual ratio was so weak. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. Which is hardly surprising, given the name. Shanghai Kai Kai Industry had a rather significant contribution from unusual items relative to its profit 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 Kai Kai Industry's Profit Performance
Summing up, Shanghai Kai Kai Industry received a nice boost to profit from unusual items, but could not match its paper profit with free cash flow. On reflection, the above-mentioned factors give us the strong impression that Shanghai Kai Kai Industry'sunderlying earnings power is not as good as it might seem, based on the statutory profit numbers. So while earnings quality is important, it's equally important to consider the risks facing Shanghai Kai Kai Industry at this point in time. Case in point: We've spotted 3 warning signs for Shanghai Kai Kai Industry you should be mindful of and 2 of them are significant.
Our examination of Shanghai Kai Kai Industry 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.
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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.
儘管公佈了強勁的收益,上海凱業實業有限公司(上海證券交易所:900943)過去一週,股票沒有太大變動。我們決定進行更深入的研究,我們相信投資者可能會對我們發現的幾個令人擔憂的因素感到擔憂。
查看我們對上海凱業的最新分析
上海證券交易所:900943收益和收入歷史2022年9月7日
仔細看看上海凱凱實業的盈利情況
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。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。
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。值得注意的是,有一些學術證據表明,一般來説,高應計比率對短期利潤來説不是一個好兆頭。
在截至2022年6月的一年中,上海凱業的應計比率為1.21。一般來説,這對未來的盈利能力來説是個不好的預兆。事實上,在此期間,該公司沒有產生任何自由現金流。儘管該公司報告利潤為4460萬加元,但看看自由現金流就會發現,該公司去年實際上燒掉了3.15億加元。我們看到一年前的FCF是6300萬加元,所以上海凱業至少在過去能夠產生正的FCF。話雖如此,故事中還有更多的東西。我們可以看到,不尋常的項目影響了其法定利潤,從而影響了應計比率。對股東來説,好消息是,上海凱業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和FCF短期錯配的一個例子。如果情況確實如此,股東應該期待本年度相對於利潤的現金流有所改善。
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凱凱實業的資產負債表分析。
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3000萬加元,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。雖然有更高的利潤總是好事,但不尋常的東西帶來的巨大貢獻有時會挫傷我們的熱情。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。考慮到這個名字,這並不令人驚訝。上海凱業在截至2022年6月的利潤中,異常項目做出了相當大的貢獻。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。
我們對上海凱凱實業盈利表現的看法
綜上所述,上海凱凱實業從異常項目中獲得了不錯的利潤提振,但無法將賬面利潤與自由現金流相匹配。仔細想想,上述因素給我們的強烈印象是,根據法定利潤數字,上海凱業的潛在盈利能力並不像看起來那麼好。因此,儘管盈利質量很重要,但考慮到上海凱凱實業目前面臨的風險也同樣重要。一個恰當的例子:我們發現了上海凱業的三個警示信號你應該注意到,其中兩個是重要的。
我們對上海凱業的審查集中在某些因素上,這些因素可能會讓該公司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。所以你可能想看看這個免費擁有高股本回報率的公司的集合,或內部人士正在購買的這份股票清單。
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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。