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When companies post strong earnings, the stock generally performs well, just like All for One Group SE's (ETR:A1OS) stock has recently. We have done some analysis, and we found several positive factors beyond the profit numbers.
View our latest analysis for All for One Group
Zooming In On All for One Group's Earnings
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. This ratio tells us how much of a company's profit is not backed by free cashflow.
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. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future".
For the year to September 2024, All for One Group had an accrual ratio of -0.16. Therefore, its statutory earnings were very significantly less than its free cashflow. In fact, it had free cash flow of €37m in the last year, which was a lot more than its statutory profit of €18.2m. All for One Group shareholders are no doubt pleased that free cash flow improved over the last twelve months.
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.
Our Take On All for One Group's Profit Performance
As we discussed above, All for One Group's accrual ratio indicates strong conversion of profit to free cash flow, which is a positive for the company. Because of this, we think All for One Group's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And the EPS is up 38% annually, over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. While it's really important to consider how well a company's statutory earnings represent its true earnings power, it's also worth taking a look at what analysts are forecasting for the future. Luckily, you can check out what analysts are forecasting by clicking here.