Latest news with #RM95m
Yahoo
10-03-2025
- Business
- Yahoo
Solid Earnings May Not Tell The Whole Story For TWL Holdings Berhad (KLSE:TWL)
The recent earnings posted by TWL Holdings Berhad (KLSE:TWL) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders. Check out our latest analysis for TWL Holdings Berhad 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. 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, TWL Holdings Berhad recorded an accrual ratio of 0.25. We can therefore deduce that its free cash flow fell well short of covering its statutory profit. Over the last year it actually had negative free cash flow of RM95m, in contrast to the aforementioned profit of RM10.2m. We also note that TWL Holdings Berhad's free cash flow was actually negative last year as well, so we could understand if shareholders were bothered by its outflow of RM95m. Unfortunately for shareholders, the company has also been issuing new shares, diluting their share of future earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of TWL Holdings Berhad. To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, TWL Holdings Berhad issued 14% more new shares over the last year. As a result, its net income is now split between a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. Check out TWL Holdings Berhad's historical EPS growth by clicking on this link. TWL Holdings Berhad was losing money three years ago. On the bright side, in the last twelve months it grew profit by 43%. On the other hand, earnings per share are only up 9.3% over the same period. So you can see that the dilution has had a bit of an impact on shareholders. In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if TWL Holdings Berhad can grow EPS persistently. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow. In conclusion, TWL Holdings Berhad has weak cashflow relative to earnings, which indicates lower quality earnings, and the dilution means its earnings per share growth is weaker than its profit growth. Considering all this we'd argue TWL Holdings Berhad's profits probably give an overly generous impression of its sustainable level of profitability. So while earnings quality is important, it's equally important to consider the risks facing TWL Holdings Berhad at this point in time. Case in point: We've spotted 4 warning signs for TWL Holdings Berhad you should be mindful of and 2 of these bad boys are a bit concerning. In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
03-03-2025
- Business
- Yahoo
GDEX Berhad (KLSE:GDEX) Is Finding It Tricky To Allocate Its Capital
When it comes to investing, there are some useful financial metrics that can warn us when a business is potentially in trouble. Typically, we'll see the trend of both return on capital employed (ROCE) declining and this usually coincides with a decreasing amount of capital employed. This indicates to us that the business is not only shrinking the size of its net assets, but its returns are falling as well. In light of that, from a first glance at GDEX Berhad (KLSE:GDEX), we've spotted some signs that it could be struggling, so let's investigate. If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for GDEX Berhad: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.011 = RM5.8m ÷ (RM603m - RM95m) (Based on the trailing twelve months to December 2024). Thus, GDEX Berhad has an ROCE of 1.1%. In absolute terms, that's a low return and it also under-performs the Logistics industry average of 5.0%. Check out our latest analysis for GDEX Berhad While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of GDEX Berhad. In terms of GDEX Berhad's historical ROCE movements, the trend doesn't inspire confidence. About five years ago, returns on capital were 5.2%, however they're now substantially lower than that as we saw above. On top of that, it's worth noting that the amount of capital employed within the business has remained relatively steady. Companies that exhibit these attributes tend to not be shrinking, but they can be mature and facing pressure on their margins from competition. If these trends continue, we wouldn't expect GDEX Berhad to turn into a multi-bagger. In summary, it's unfortunate that GDEX Berhad is generating lower returns from the same amount of capital. And long term shareholders have watched their investments stay flat over the last five years. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere. On a separate note, we've found 1 warning sign for GDEX Berhad you'll probably want to know about. While GDEX Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
