Some Investors May Be Willing To Look Past Celsius Holdings' (NASDAQ:CELH) Soft Earnings

Yahoo

12-03-2025

Celsius Holdings, Inc.'s (NASDAQ:CELH) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.
See our latest analysis for Celsius Holdings
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. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. This ratio tells us how much of a company's profit is not backed by free cashflow.
As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. 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".
Over the twelve months to December 2024, Celsius Holdings recorded an accrual ratio of -0.40. That indicates that its free cash flow quite significantly exceeded its statutory profit. To wit, it produced free cash flow of US$240m during the period, dwarfing its reported profit of US$107.5m. Celsius Holdings 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.
Happily for shareholders, Celsius Holdings produced plenty of free cash flow to back up its statutory profit numbers. Because of this, we think Celsius Holdings' underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! On the other hand, its EPS actually shrunk in the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Celsius Holdings at this point in time. Every company has risks, and we've spotted 3 warning signs for Celsius Holdings you should know about.
Today we've zoomed in on a single data point to better understand the nature of Celsius Holdings' profit. 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.
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