Shenzhen Zhongheng Huafa Co., Ltd.'s (SZSE:200020) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.
View our latest analysis for Shenzhen Zhongheng Huafa
![earnings-and-revenue-history](https://usnewsfile.futunn.com/pic/0-14195774-0-f4a2614e293ecee5e7d1d3556522df17.png/big)
SZSE:200020 Earnings and Revenue History August 29th 2022
A Closer Look At Shenzhen Zhongheng Huafa's Earnings
Many investors haven't heard of the accrual ratio from cashflow, but it is actually a useful measure of how well a company's profit is backed up by free cash flow (FCF) during a given period. The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. The ratio shows us how much a company's profit exceeds its FCF.
That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. 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. 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, Shenzhen Zhongheng Huafa recorded an accrual ratio of -0.11. That indicates that its free cash flow was a fair bit more than its statutory profit. To wit, it produced free cash flow of CN¥53m during the period, dwarfing its reported profit of CN¥9.02m. Shenzhen Zhongheng Huafa's free cash flow improved over the last year, which is generally good to see. 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.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shenzhen Zhongheng Huafa.
The Impact Of Unusual Items On Profit
Surprisingly, given Shenzhen Zhongheng Huafa's accrual ratio implied strong cash conversion, its paper profit was actually boosted by CN¥5.9m in unusual items. 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 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. We can see that Shenzhen Zhongheng Huafa'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 Shenzhen Zhongheng Huafa's Profit Performance
Shenzhen Zhongheng Huafa's profits got a boost from unusual items, which indicates they might not be sustained and yet its accrual ratio still indicated solid cash conversion, which is promising. Based on these factors, we think it's very unlikely that Shenzhen Zhongheng Huafa's statutory profits make it seem much weaker than it is. So while earnings quality is important, it's equally important to consider the risks facing Shenzhen Zhongheng Huafa at this point in time. For example - Shenzhen Zhongheng Huafa has 1 warning sign we think you should be aware of.
Our examination of Shenzhen Zhongheng Huafa has focussed on certain factors that can make its earnings look better than they are. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.
深圳市中恆華發股份有限公司[SZSE:200020]近期疲弱的盈利報告並未導致股市大幅波動。然而,我們認為投資者應該意識到一些可能令人擔憂的潛在因素。
查看我們對深圳中恆華發的最新分析
![earnings-and-revenue-history](https://usnewsfile.futunn.com/pic/0-14195774-0-f4a2614e293ecee5e7d1d3556522df17.png/big)
SZSE:200020收益和收益歷史2022年8月29日
近距離觀察深圳中恆華發的收益
許多投資者都沒有聽説過現金流應計比率但它實際上是衡量一家公司在給定時期內自由現金流(FCF)支持公司利潤的程度的有用指標。應計制比率從給定期間的利潤中減去FCF,然後將結果除以該時間段內公司的平均運營資產。這一比率向我們展示了一家公司的利潤超過其固定現金流的程度。
這意味着負的應計比率是一件好事,因為它表明該公司帶來的自由現金流比其利潤所暗示的要多。這並不意味着我們應該擔心應計比率為正,但值得注意的是,在應計比率相當高的地方。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,深圳中恆華發的應計比率為-0.11。這表明其自由現金流遠遠高於其法定利潤。換言之,該公司在此期間產生了5300萬加元的自由現金流,令其公佈的902萬加元利潤相形見絀。深圳中恆華發的自由現金流在過去一年有所改善,總體上是好的。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。
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深圳中恆華發的資產負債表分析。
異常項目對利潤的影響
令人意外的是,鑑於深圳中恆華發的應計比率意味着強勁的現金轉換,其賬面利潤實際上得到了590萬加元不尋常項目的提振。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。當我們分析全球絕大多數上市公司時,我們發現重大的不尋常項目往往不會重複。畢竟,這正是會計術語所暗示的。我們可以看到,深圳中恆華發的積極異常項目與其截至2022年6月的年度利潤相比相當重要。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。
我們對深圳中恆華發盈利表現的看法
深圳中恆華發的利潤受到異常項目的提振,這表明它們可能無法持續,但其應計比率仍顯示出穩健的現金轉換,這是有希望的。基於這些因素,我們認為深圳中恆華發的法定利潤不太可能讓它看起來比實際情況弱得多。因此,儘管盈利質量很重要,但考慮到深圳中恆華發目前面臨的風險也同樣重要。例如-深圳中恆華發1個警告標誌我們認為你應該意識到。
我們對深圳中恆華發的審查集中在某些因素上,這些因素可能會讓其收益看起來比實際情況更好。但如果你有能力將注意力集中在細枝末節上,總會有更多的東西需要發現。一些人認為,高股本回報率是高質量企業的良好標誌。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。