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Credit Bureau Asia Limited's (SGX:TCU) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.
See our latest analysis for Credit Bureau Asia
Zooming In On Credit Bureau Asia'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.
Therefore, it's actually considered a good thing when a company has a negative accrual ratio, but a bad thing if its accrual ratio is positive. 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. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.
Over the twelve months to December 2024, Credit Bureau Asia recorded an accrual ratio of -2.32. Therefore, its statutory earnings were very significantly less than its free cashflow. In fact, it had free cash flow of S$29m in the last year, which was a lot more than its statutory profit of S$11.2m. Credit Bureau Asia's free cash flow improved over the last year, which is generally good to see.
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 Credit Bureau Asia's Profit Performance
Happily for shareholders, Credit Bureau Asia produced plenty of free cash flow to back up its statutory profit numbers. Because of this, we think Credit Bureau Asia's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And the EPS is up 43% annually, over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Ultimately, this article has formed an opinion based on historical data. However, it can also be great to think about what analysts are forecasting for the future. Luckily, you can check out what analysts are forecasting by clicking here.