We Believe Leon Technology's (SZSE:300603) Earnings Are A Poor Guide For Its Profitability
We Believe Leon Technology's (SZSE:300603) Earnings Are A Poor Guide For Its Profitability
After announcing healthy earnings, Leon Technology Co., Ltd.'s (SZSE:300603) stock rose over the last week. While the headline numbers were strong, we found some underlying problems once we started looking at what drove earnings.
在宣布健康收入表现之后,立昂技术股份有限公司(SZSE:300603)的股价在上周上涨。虽然头条数字很强劲,但一旦我们开始审视推动收入增长的因素时,我们发现了一些潜在问题。

Examining Cashflow Against Leon Technology's Earnings
审视自由现金流与立昂技术的营业收入
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.
正如财务迷们已经知道的那样,现金流的应计比率是评估公司自由现金流(FCF)与利润匹配程度的重要指标。为了获得应计比率,我们首先减去一段时间的FCF和利润,然后将该数字除以该期间的平均营运资产。该比率显示了公司的利润超过其FCF的多少。
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".
这意味着负面预提比率是一件好事,因为它表明公司所获得的自由现金流比其利润所示的要多。这并不意味着我们应该担心正面的预提比率,但值得注意的是,如果预提比率很高的话就要考虑这个问题。引用Lewellen和Resutek在2014年的一篇论文:“预提较高的公司未来的盈利能力较低”。
For the year to September 2024, Leon Technology had an accrual ratio of 0.28. We can therefore deduce that its free cash flow fell well short of covering its statutory profit, suggesting we might want to think twice before putting a lot of weight on the latter. Even though it reported a profit of CN¥11.9m, a look at free cash flow indicates it actually burnt through CN¥293m in the last year. We also note that Leon Technology's free cash flow was actually negative last year as well, so we could understand if shareholders were bothered by its outflow of CN¥293m. However, that's not all there is to consider. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio. The good news for shareholders is that Leon Technology'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. As a result, some shareholders may be looking for stronger cash conversion in the current year.
截至2024年9月的年度报告显示,立昂技术的应计比率为0.28。因此,我们可以推断其自由现金流远远不足以覆盖其法定利润,这表明我们在对后者投放重要性之前可能需要三思。尽管其报告了约1190万人民币的利润,但从自由现金流来看,它在过去一年实际上焚烧了29300万人民币。我们还注意到,立昂技术去年的自由现金流实际上也是负数,因此我们可以理解如果股东对其2.93亿人民币的流出感到困扰。然而,考虑的还不止这些。我们可以看到异常项目影响其法定利润,因此也影响了应计比率。对股东的好消息是,立昂技术去年的应计比率要好得多,因此今年的糟糕数据可能只是利润与自由现金流之间短期不匹配的情况。因此,一些股东可能在本年度寻求更强劲的现金转化。
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Leon Technology.
注意:我们始终建议投资者检查资产负债表的实力。点击这里查看我们对立昂技术资产负债表的分析。
How Do Unusual Items Influence Profit?
非常规项目如何影响利润?
Given the accrual ratio, it's not overly surprising that Leon Technology's profit was boosted by unusual items worth CN¥10m in the last twelve months. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. Leon Technology had a rather significant contribution from unusual items relative to its profit to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.
考虑到应计比率,可能并不奇怪的是,在过去十二个月中,飞凡项目使立昂技术的利润增加了1,000万人民币。虽然我们乐于看到利润增长,但当飞凡项目对利润产生重大贡献时,我们往往会更加谨慎。我们分析了全球大多数上市公司,发现重大的飞凡项目通常不会反复出现。毕竟,这正是会计术语所暗示的。相对于截至2024年9月的利润,立昂技术从飞凡项目中获得了相当可观的贡献。其他一切相等的情况下,这可能导致将法定利润作为核心盈利能力的不良参考。
Our Take On Leon Technology's Profit Performance
我们对立昂技术利润表现的看法
Summing up, Leon Technology received a nice boost to profit from unusual items, but could not match its paper profit with free cash flow. Considering all this we'd argue Leon Technology's profits probably give an overly generous impression of its sustainable level of profitability. So while earnings quality is important, it's equally important to consider the risks facing Leon Technology at this point in time. To that end, you should learn about the 2 warning signs we've spotted with Leon Technology (including 1 which doesn't sit too well with us).
综上所述,立昂技术从飞凡项目中获得了利润的不错提升,但未能用自由现金流匹配其账面利润。考虑到所有这一切,我们认为立昂技术的利润可能过分夸大了其可持续盈利水平的印象。因此,虽然盈利质量很重要,但同样重要的是考虑当前阶段立昂技术面临的风险。为此,您应了解我们发现的立昂技术的2个预警信号(其中1个对我们来说不太令人满意)。
Our examination of Leon Technology 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. 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.
我们对立昂技术的审查主要集中在一些因素上,这些因素可能让其盈利看起来比实际情况更好。基于这一点,我们持有一定的怀疑态度。但还有许多其他方法来了解公司。例如,许多人认为高股本回报率是有利的经营经济指标,而另一些人则喜欢'跟着资金走',寻找内部人员正在购买的股票。虽然这可能需要您进行一些研究,但您可能会发现这个集合高股本回报率公司的免费公司,或者这份具有重要内部持股的股票清单对您有用。
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