Latest news with #adessoSE
Yahoo
19-05-2025
- Business
- Yahoo
We Think adesso's (ETR:ADN1) Robust Earnings Are Conservative
Investors were underwhelmed by the solid earnings posted by adesso SE (ETR:ADN1) recently. We did some digging and actually think they are being unnecessarily pessimistic. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the accrual ratio. 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. As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. While it's not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth. For the year to March 2025, adesso had an accrual ratio of -0.17. That indicates that its free cash flow quite significantly exceeded its statutory profit. To wit, it produced free cash flow of €58m during the period, dwarfing its reported profit of €7.84m. adesso 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. As we discussed above, adesso's accrual ratio indicates strong conversion of profit to free cash flow, which is a positive for the company. Based on this observation, we consider it possible that adesso's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 1 warning sign for adesso you should know about. This note has only looked at a single factor that sheds light on the nature of adesso's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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
27-01-2025
- Business
- Yahoo
adesso's (ETR:ADN1) investors will be pleased with their notable 70% return over the last five years
When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, the adesso SE (ETR:ADN1) share price is up 65% in the last 5 years, clearly besting the market return of around 4.2% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 1.6%, including dividends. With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies. See our latest analysis for adesso In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price. During five years of share price growth, adesso actually saw its EPS drop 22% per year. Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead. We doubt the modest 0.7% dividend yield is attracting many buyers to the stock. In contrast revenue growth of 23% per year is probably viewed as evidence that adesso is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth. You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values). We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling adesso stock, you should check out this free report showing analyst profit forecasts. It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for adesso the TSR over the last 5 years was 70%, which is better than the share price return mentioned above. This is largely a result of its dividend payments! adesso shareholders are up 1.6% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 11% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - adesso has 2 warning signs (and 1 which is significant) we think you should know about. Of course adesso may not be the best stock to buy. So you may wish to see this free collection of growth stocks. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German exchanges. 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. Sign in to access your portfolio
