Cross Country Healthcare, Inc.'s (NASDAQ:CCRN) earnings announcement last week didn't impress shareholders. However, our analysis suggests that the soft headline numbers are getting counterbalanced by some positive underlying factors.
NasdaqGS:CCRN Earnings and Revenue History May 10th 2024
Zooming In On Cross Country Healthcare'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. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. This ratio tells us how much of a company's profit is not backed by free cashflow.
As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. That is not intended to imply we should worry about a positive accrual ratio, but it's worth noting where the accrual ratio is rather high. 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 March 2024, Cross Country Healthcare recorded an accrual ratio of -0.28. That indicates that its free cash flow quite significantly exceeded its statutory profit. In fact, it had free cash flow of US$195m in the last year, which was a lot more than its statutory profit of US$45.9m. Cross Country Healthcare's free cash flow actually declined over the last year, which is disappointing, like non-biodegradable balloons. Having said that, there is more to the story. The accrual ratio is reflecting the impact of unusual items on statutory profit, at least in part.
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.
The Impact Of Unusual Items On Profit
Cross Country Healthcare's profit was reduced by unusual items worth US$9.8m in the last twelve months, and this helped it produce high cash conversion, as reflected by its unusual items. In a scenario where those unusual items included non-cash charges, we'd expect to see a strong accrual ratio, which is exactly what has happened in this case. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Cross Country Healthcare doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
Our Take On Cross Country Healthcare's Profit Performance
Considering both Cross Country Healthcare's accrual ratio and its unusual items, we think its statutory earnings are unlikely to exaggerate the company's underlying earnings power. After considering all this, we reckon Cross Country Healthcare's statutory profit probably understates its earnings potential! With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 3 warning signs for Cross Country Healthcare you should be mindful of and 1 of these bad boys is a bit unpleasant.
Our examination of Cross Country Healthcare has focussed on certain factors that can make its earnings look better than they are. And it has passed with flying colours. 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.
先週、Cross Country Healthcare, Inc.(NASDAQ:CCRN)の業績発表は株主たちを感心させませんでした。しかし、私たちの分析によると、ソフトなヘッドラインの数字はいくつかのポジティブな基本的なファクターで相殺されているようです。
2024年3月までの12か月間、Cross Country Healthcareは-0.28の償却比率を記録しました。これは、自由現金流が法定利益をかなり上回っていることを示しています。実際、昨年は1億9500万ドルのフリーキャッシュフローを計上し、法定利益の45.9百万ドルよりもはるかに多くの利益がありました。Cross Country Healthcareのフリーキャッシュフローは、前年に比べて実際に減少しましたが、これは不生分解性の風船のように失望を招きます。しかし、物語にもう少し余裕があります。償却比率は、少なくとも一部が法定利益に対する異常な項目の影響を反映しています。
クロスカントリーヘルスケアの利益は、過去12か月間の異常な項目で980万ドルの価値が減少しました。これにより、異常な項目に反映されるように過高なキャッシュコンバージョンが生じました。非現金費用を含む場合、強力な償却比率が発生することが期待されます。受け入れがたい異常な項目による控除は最初の例では失望を招きますが、銀のライニングがあります。世界中のほとんどの上場企業を分析したところ、重大な異常な項目はしばしば繰り返されないことがわかりました。そして、結局のところ、それが会計用語が暗示する正確にこれです。Cross Country Healthcareがこれらの異常な費用が再発生しない場合、他の条件が同じであれば、今後の年間利益の増加が期待されます。
Cross Country Healthcareの利益パフォーマンスに対する私たちの見解
Cross Country Healthcareの償却比率と異常な項目を考慮すると、私たちはその法定収益が会社の基盤となる収益力を誇張する可能性は低いと考えています。すべてを考慮した後、Cross Country Healthcareの法的収益は、その収益力の潜在性を過小評価している可能性があります!この点を考慮すると、私たちはリスクの理解が十分でない限り、株式投資を検討することはできません。ワーニングサインが3つあることがわかっています。Cross Country Healthcareについては、これらのうち1つが少し不快です。
Cross Country Healthcareの検討において、その収益が上記のように見える要因に焦点を当てました。Flying Colorsでパスしました。しかし、ここで細かい点に注意を払うことができる場合、常にさらに発見することができます。例えば、多くの人々は、高い株主資本利益率を有利なビジネス経済指標の一つとして見なしており、他の人々は「資金を追いかけて」、内部者が購入している株式を探しています。高い株主資本利益率を誇る企業の無料のコレクションを見ることを希望される場合は、こちら、または内部者が購入している株式のリストを見ることができます。
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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。