Despite posting some strong earnings, the market for OrbusNeich Medical Group Holdings Limited's (HKG:6929) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.
SEHK:6929 Earnings and Revenue History April 26th 2024
Examining Cashflow Against OrbusNeich Medical Group Holdings' Earnings
As finance nerds would already know, the accrual ratio from cashflow is a key measure for assessing how well a company's free cash flow (FCF) matches its profit. 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. The ratio shows us how much a company's profit exceeds its FCF.
As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. 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.
Over the twelve months to December 2023, OrbusNeich Medical Group Holdings recorded an accrual ratio of 0.29. 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. Indeed, in the last twelve months it reported free cash flow of US$17m, which is significantly less than its profit of US$45.1m. OrbusNeich Medical Group Holdings' free cash flow actually declined over the last year, but it may bounce back next year, since free cash flow is often more volatile than accounting profits. The good news for shareholders is that OrbusNeich Medical Group Holdings' 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.
That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.
Our Take On OrbusNeich Medical Group Holdings' Profit Performance
OrbusNeich Medical Group Holdings' accrual ratio for the last twelve months signifies cash conversion is less than ideal, which is a negative when it comes to our view of its earnings. Because of this, we think that it may be that OrbusNeich Medical Group Holdings' statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 72% in the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that OrbusNeich Medical Group Holdings has 1 warning sign and it would be unwise to ignore it.
This note has only looked at a single factor that sheds light on the nature of OrbusNeich Medical Group Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.
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.
OrbusNeich Medical Group Holdings Limited(HKG:6929)の株価は、強い収益を報告してもほとんど動いていません。詳細について調べているところですが、いくつか懸念すべき要因を発見しました。
2023年12月までの12か月間において、OrbusNeich Medical Group Holdingsは償却比率0.29を記録しました。したがって、そのフリーキャッシュフローが法定利益よりもかなり低かったことから、その利益数字が本当に有用かどうかについて疑問がわくことになります。実際、過去12か月間に報告されたフリーキャッシュフローは1700万ドルで、その利益の4510万ドルに比べて著しく少ないです。オーバスネイックメディカルグループホールディングスのフリーキャッシュフローは、実際には昨年下降しましたが、会計利益よりも変動幅が大きいため、来年には回復する可能性があります。株主にとって良いニュースは、オーバスネイックメディカルグループホールディングスの償却比率が昨年ははるかに良かったので、今年の悪い数字は、利益とフリーキャッシュフローの短期的な不一致の場合があるためです。その結果、一部の株主は、現在の年においてより強いキャッシュ収益に期待しているかもしれません。
過去12か月間のオーバスネイックメディカルグループホールディングスの償却比率は、キャッシュの変換が理想的ではないことを示しており、利益に対する私たちの見方がネガティブであると考えています。このため、オーバスネイックメディカルグループホールディングスの法定利益が基礎となる収益力よりも優れている可能性があります。良いニュースは、直近1年間のEPSは72%増加しました。最終的には、会社を正しく理解するには、上記のファクターに留まらず、より多くを考慮する必要があります。これを念頭に置いて、私たちはリスクを完全に理解するまで、株式投資は考えないと考えています。私たちが分析を行っている間、OrbusNeich Medical Group Holdingsに1つの警告サインがあることがわかり、無視することは賢明でないと思います。
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。
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。