[ad_1]
Humble Hotel Management Consulting Co., Ltd. (Taiwan Stock Exchange: 2739) has posted some strong results recently, and the market has reacted positively. We did some digging and discovered some further encouraging factors that investors will like.
See our latest analysis for Humble House Hotel Management Consultants
Briefly describe the profit status of Humble House Hotel Management Consulting Company
A key financial ratio that measures how well a company converts profits into free cash flow (FCF) is accrual ratio. The accrual ratio subtracts free cash flow from profit for a given period and divides the result by the company’s average operating assets for that period. This ratio shows us how much a company’s profits exceed its free cash flow.
This means that a negative accrual ratio is a good thing, as it indicates that the company is bringing in more free cash flow than its profits would suggest. While there’s nothing wrong with an accrual ratio above zero, we do think it’s worth noting when a company’s accrual ratio is relatively high. It’s worth noting that there’s some academic evidence that, generally speaking, a high accrual ratio is a bad sign for short-term profits.
Humble House Hotel Management Consulting’s accrual ratio for the twelve months to December 2023 was -1.63. As a result, its statutory earnings are well below its free cash flow. That said, the company generated free cash flow of NT$130 million during the period, dwarfed by its reported profit of NT$414 million. Humble House Hotel Management Consultants shareholders were no doubt pleased with the improvement in free cash flow over the last twelve months. However, that’s not all there is to consider. The accrual ratio reflects, at least in part, the impact of unusual items on statutory profits.
This might make you wonder what analysts are forecasting for future profitability. Luckily, you can click here to see an interactive chart depicting future profitability based on their estimates.
Impact of unusual items on profits
Surprisingly, given that Humble House Hotel Management Consulting’s accrual ratio implies strong cash conversion, its book profit was actually increased by NT$158m due to special items. We can’t deny that higher profits usually make us feel optimistic, but we would prefer it if the profits were sustainable. When we analyze the vast majority of public companies around the world, we find that significant unusual items tend not to repeat themselves. That’s as you’d expect, since the boosts are described as “unusual.” We can see that Humble House Hotel Management Consultants’ positive abnormal items are quite significant relative to its profit for the year to December 2023. All else being equal, this may result in statutory profits being a poor reflection of underlying profitability.
Our view on Humble House Hotel Management Consulting’s earnings performance
Humble House Hotel Management Consultants’ profits were boosted by unusual items that suggested they might not be sustainable, but its accrual ratio still pointed to solid cash conversion, which is promising. Given the comparative factors, we don’t have a strong view on whether Humble House Hotel Management Consulting’s profits appropriately reflect its underlying earnings potential. If you want to know more about Humble House Hotel Management Consultants’ business, it’s important to understand any risks it faces.Case in point: we found 3 warning signs for Humble Hotel Management Consulting You should note that one of them is a bit unpleasant.
Our research on Humble House Hotel Management Consultants focuses on certain factors that could make its earnings look better than they actually are. But there’s always more to discover if you can focus on the details. Some consider a high return on equity to be a good indicator of a quality business.While you may need to do some research, you may find that free A collection of companies boasting a high return on equity, or a list of useful stocks that insiders are buying.
Valuation is complex, but we’re helping to make it simple.
Find out if Humble House Hotel Management Consulting is likely overvalued or undervalued by checking out our comprehensive analysis, including Fair value estimates, risks and warnings, dividends, insider trading and financial health.
View free analysis
Have feedback on this article? Follow the content? keep in touch Contact us directly. Alternatively, email the editorial team at (at) simplewallst.com.
This article from Simply Wall St is general in nature. We only use unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended to provide financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or your financial situation. Our goal is to provide you with long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative information. Simply Wall St has no position in any of the stocks mentioned.
[ad_2]
Source link