Creative China Holdings' (HKG:8368) Profits May Be Overstating Its True Earnings Potential
Creative China Holdings' (HKG:8368) Profits May Be Overstating Its True Earnings Potential
Shareholders didn't seem to be thrilled with Creative China Holdings Limited's (HKG:8368) recent earnings report, despite healthy profit numbers. Our analysis has found some concerning factors which weaken the profit's foundation.
股東似乎對中國創意控股有限公司(HKG:8368)最近的收益報告並不感到滿意,儘管利潤數字表現良好。我們的分析發現了一些令人擔憂的因素,削弱了利潤的基礎。
Zooming In On Creative China Holdings' Earnings
深入研究中國創意控股的收益
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. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'.
衡量公司將其利潤轉化爲自由現金流(FCF)的一項關鍵財務比率是應計比率。簡單地說,這個比率將FCF從淨利潤中減去,然後除以該公司在該期間的平均運營資產。您可以將從現金流中得出的應計比率視爲「非FCF利潤比率」。
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.
因此,負應計比率對公司是有益的,而正應計比率則是不利的。這並不是說我們應該擔心正應計比率,但值得注意的是應計比率相當高的地方。值得注意的是,有一些學術證據表明,高應計比率通常是短期利潤的不良跡象。
Creative China Holdings has an accrual ratio of 0.45 for the year to June 2024. As a general rule, that bodes poorly for future profitability. To wit, the company did not generate one whit of free cashflow in that time. Over the last year it actually had negative free cash flow of CN¥51m, in contrast to the aforementioned profit of CN¥53.0m. We saw that FCF was CN¥11m a year ago though, so Creative China Holdings has at least been able to generate positive FCF in the past. Notably, the company has issued new shares, thus diluting existing shareholders and reducing their share of future earnings.
中國創意控股截至2024年6月的預收比率爲0.45。一般來說,這對未來的盈利預示着不佳。換句話說,在那段時間內,公司沒有產生任何自由現金流。在過去的一年裏,實際上有負的自由現金流爲5,100萬人民幣,與前述的利潤5,300萬人民幣形成對比。不過我們發現,一年前的自由現金流爲1,100萬人民幣,因此中國創意控股至少過去有能力產生正面的自由現金流。值得注意的是,公司發行了新股,從而稀釋了現有股東的份額,減少了他們未來收益的份額。
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Creative China Holdings.
注意:我們始終建議投資者檢查資產負債表的實力。請單擊此處,查看我們對中國創意控股的資產負債表分析。
To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Creative China Holdings issued 35% more new shares over the last year. That means its earnings are split among a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. Check out Creative China Holdings' historical EPS growth by clicking on this link.
要理解一家公司利潤增長的價值,有必要考慮到股東利益的稀釋。實際上,中國創意控股在去年發行了比去年多35%的新股。這意味着其利潤分配給更多的股份.每股收益(EPS)這樣的指標可以幫助我們了解股東從公司利潤中受益的實際情況,而淨利潤水平則更能體現公司的絕對規模。通過點擊鏈接,您可以查看中國創意控股的歷史EPS增長。
How Is Dilution Impacting Creative China Holdings' Earnings Per Share (EPS)?
稀釋對中國創意控股的每股收益(EPS)產生了什麼影響?
Creative China Holdings has improved its profit over the last three years, with an annualized gain of 221% in that time. In comparison, earnings per share only gained 43% over the same period. And in the last year the company managed to bump profit up by 10%. But that's starkly different from the 18% drop in earnings per share. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.
中國創意控股在過去三年中提高了其利潤,年化增長率爲221%。與此同時,每股收益僅在同期增長了43%。去年,該公司成功提高了10%的利潤。但這與每股收益下降了18%形成了鮮明對比。因此,您可以清楚地看到稀釋對股東產生了相當大的影響。
If Creative China Holdings' EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.
如果中國創意控股的每股收益能夠隨時間增長,那麼股價朝着同樣的方向大幅上漲的可能性就會大大提高。但另一方面,如果只有利潤(而不是每股收益)正在改善,我們則會更不興奮。基於這個原因,可以說每股收益在長期內比淨利潤更重要,假設目標是評估一家公司的股價可能增長。
Our Take On Creative China Holdings' Profit Performance
我們對中國創意控股的利潤表現的看法
In conclusion, Creative China Holdings has weak cashflow relative to earnings, which indicates lower quality earnings, and the dilution means that shareholders now own a smaller proportion of the company (assuming they maintained the same number of shares). For the reasons mentioned above, we think that a perfunctory glance at Creative China Holdings' statutory profits might make it look better than it really is on an underlying level. If you'd like to know more about Creative China Holdings as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Creative China Holdings (including 1 which shouldn't be ignored).
總之,相對於利潤而言,中國創意控股的現金流較弱,這表明利潤質量較低,並且稀釋意味着股東現在擁有公司的比例較小(假設他們保持了相同數量的股份)。因上述原因,我們認爲對中國創意控股的法定利潤進行膚淺的審視可能使其看起來比它在基礎水平上實際上更好。如果您想了解有關中國創意控股作爲一家企業的更多信息,了解其面臨的任何風險很重要。爲此,您應該了解我們發現的3個警示標誌(包括不容忽視的1個)。
Our examination of Creative China Holdings 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 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. 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 with significant insider holdings to be useful.
我們對中國創意控股進行的審查已經側重於一些因素,這些因素可能會使其收益看起來比實際情況更好。在這一基礎上,我們有些持懷疑態度。但如果你能集中注意力在細枝末節上,總是可以發現更多的。例如,許多人認爲高股本回報是有利的商業經濟指標,而其他人則喜歡「跟隨資金」並尋找內部人在買入的股票。雖然這可能需要您進行一些研究,但您可能會發現這個免費的公司收集有利可圖的高股本回報,或者擁有重大內部持股的股票清單會很有用。
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