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ZEAL Network SE's (ETR:TIMA) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.
Our free stock report includes 1 warning sign investors should be aware of before investing in ZEAL Network. Read for free now.
Zooming In On ZEAL Network'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. 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.
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. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future".
Over the twelve months to March 2025, ZEAL Network recorded an accrual ratio of -0.12. That indicates that its free cash flow was a fair bit more than its statutory profit. To wit, it produced free cash flow of €77m during the period, dwarfing its reported profit of €47.1m. ZEAL Network 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 ZEAL Network's Profit Performance
As we discussed above, ZEAL Network has perfectly satisfactory free cash flow relative to profit. Based on this observation, we consider it likely that ZEAL Network's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into ZEAL Network, you'd also look into what risks it is currently facing. While conducting our analysis, we found that ZEAL Network has 1 warning sign and it would be unwise to ignore it.