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Yahoo
10 hours ago
- Business
- Yahoo
We Think Hong Leong Industries Berhad's (KLSE:HLIND) Profit Is Only A Baseline For What They Can Achieve
When companies post strong earnings, the stock generally performs well, just like Hong Leong Industries Berhad's (KLSE:HLIND) stock has recently. We did some digging and found some further encouraging factors that investors will like. 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. That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. 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. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking. Over the twelve months to March 2025, Hong Leong Industries Berhad recorded an accrual ratio of -0.21. Therefore, its statutory earnings were very significantly less than its free cashflow. To wit, it produced free cash flow of RM576m during the period, dwarfing its reported profit of RM467.2m. Hong Leong Industries Berhad 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, Hong Leong Industries Berhad produced plenty of free cash flow to back up its statutory profit numbers. Because of this, we think Hong Leong Industries Berhad's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Better yet, its EPS are growing strongly, which is nice to see. 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. If you want to do dive deeper into Hong Leong Industries Berhad, you'd also look into what risks it is currently facing. Our analysis shows 2 warning signs for Hong Leong Industries Berhad (1 doesn't sit too well with us!) and we strongly recommend you look at them before investing. Today we've zoomed in on a single data point to better understand the nature of Hong Leong Industries Berhad's profit. 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. Sign in to access your portfolio
Globe and Mail
4 days ago
- Business
- Globe and Mail
Disney Hits Box Office Highs with Lilo & Stitch - Is DIS Stock a Buy Now?
The Walt Disney Company's (DIS) hit movie ' Lilo & Stitch ' made box office highs on Memorial Day weekend. So, is DIS stock a buy here? Yes - a quick look at its strong free cash flow profile and revenue forecasts shows it could be 24% or so undervalued, worth over $139 per share. DIS is at $112.54 in midday trading on Tuesday, May 27. That is well up from recent lows but only slightly lower than 6-month highs. On May 26, Rotten Tomatoes reported that Lilo & Stitch ' Roars to Highest Memorial Day Weekend Ever.' It is estimated to have grossed $183 million for the long weekend, beating out Paramount's 'Mission: Impossible' film. That implies Disney's cash flow strength seen last quarter could continue this quarter and the fiscal year ending Sept. 2025. This article will look at this. Free Cash Flow Estimates On May 7, Disney reported that its fiscal Q2 ended March 29, revenue was up 7% YoY, and it generated 15% higher operating income. More importantly, its free cash flow (FCF) and FCF margins (i.e., FCF/revenue) surged, as seen in the table below (taken from page 3 of its quarterly earnings release). This shows that FCF was up over double in the quarter, and its FCF margins almost doubled to 20.7%. Moreover, for the past 6 months, it converted 11.65% of revenue into free cash flow. We can use that to estimate its FCF going forward. For example, analysts now expect revenue for this FY ending Sept. 30, 2025, will rise by 2.8% from $92.5 billion last year to $95.11 billion. In addition, forecasts for the next fiscal year are for +5.1% higher revenue of $99.98 billion (almost $100 billion). If it keeps generating hits like Lilo & Stitch, that could happen. That implies that Disney will be on a next 12-month (NTM) run rate revenue of about $97.5 billion. So, if the company can keep generating an FCF margin between 12% and 20% (average of 16%) over that period, here is the FCF forecast: $97.5 billion x 16% FCF margin = $15.6 billion FCF As a result, DIS stock could be worth significantly more. Let's estimate its price target. Target Price for DIS Stock For example, using a 5.0% FCF yield metric (i.e., which assumes that 100% of FCF is paid out to shareholders and the market gives the stock a 5% dividend yield), DIS stock is worth much more than its price today. Let's see how that works. This means that we take the FCF estimate and divide it by 5% (which is the same as multiplying by the reciprocal, or 20x): $15.6 b FCF x 20 = $312 billion market cap That is 54% higher than today's market cap of $202 billion. In other words, DIS stock is worth 54% more or $112.54 x 1.54 = $173 per share However, just to be conservative, let's scale back our parameters. Let's assume that FCF margins stay low at 12.5% and the company generates lower FCF: 0.125 x $97.5 billion NTM revenue = $12.19 billion FCF Next, using a lower FCF multiple of just 18.2 times (i.e., a FCF yield of 5.50%): $12.19b FCF x 18.2 = $221.9 billion mkt cap That is just 10% higher than today's $202 billion market valuation. It means the target price would be $123.79 per share. Expected Return. So, on average, that implies that Disney's valuation could range between $222 billion and $312 billion, or $124 to $173 p/sh (i.e., an average of $148.50). However, the expected return might be lower if we weight the lower target price higher. For example, let's say there is a 2/3rds likelihood DIS stock is worth $123 vs. a 1/3rd chance it's worth $173: $123 x 0.667 = $82.04 + $173 x 0.333 = $57.61 = Target Price = $139.65 Expected Return = $139.65 / $112.54 -1 = 1.24 -1 = +24% Summary So, assuming Disney generates FCF margins this year and next of between 12% and 20% and weighting that possibility heavier on the lower side, an investor can expect around a 24% return investing in DIS stock today at over $139 per share Analysts tend to agree with this target price. For example, Yahoo! Finance reports that 31 analysts have an average price of $123.90. Similarly, Barchart's mean survey is for 125.73. which tracks recent analyst recommendations, shows that the average of 27 analysts is $129.41 per share. That is +15% higher than today's price. The bottom line here is that DIS still looks undervalued, using a FCF and FCF margin analysis, a FCY yield valuation metric, expected return analysis, and also analysts' price targets.
Yahoo
23-05-2025
- Business
- Yahoo
JOST Werke's (ETR:JST) Soft Earnings Are Actually Better Than They Appear
Shareholders appeared unconcerned with JOST Werke SE's (ETR:JST) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. 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. For the year to March 2025, JOST Werke had an accrual ratio of -0.11. That implies it has good cash conversion, and implies that its free cash flow solidly exceeded its profit last year. To wit, it produced free cash flow of €125m during the period, dwarfing its reported profit of €45.6m. JOST Werke did see its free cash flow drop year on year, which is less than ideal, like a Simpson's episode without Groundskeeper Willie. Having said that, there is more to the story. The accrual ratio is reflecting the impact of unusual items on statutory profit, at least in part. See our latest analysis for JOST Werke 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. JOST Werke's profit was reduced by unusual items worth €31m in the last twelve months, and this helped it produce high cash conversion, as reflected by its unusual items. This is what you'd expect to see where a company has a non-cash charge reducing paper profits. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect JOST Werke to produce a higher profit next year, all else being equal. In conclusion, both JOST Werke's accrual ratio and its unusual items suggest that its statutory earnings are probably reasonably conservative. Looking at all these factors, we'd say that JOST Werke's underlying earnings power is at least as good as the statutory numbers would make it seem. So while earnings quality is important, it's equally important to consider the risks facing JOST Werke at this point in time. You'd be interested to know, that we found 3 warning signs for JOST Werke and you'll want to know about them. After our examination into the nature of JOST Werke's profit, we've come away optimistic for the company. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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. 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
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
08-05-2025
- Business
- Yahoo
We Think Kerjaya Prospek Group Berhad's (KLSE:KERJAYA) Solid Earnings Are Understated
The market seemed underwhelmed by last week's earnings announcement from Kerjaya Prospek Group Berhad (KLSE:KERJAYA) despite the healthy numbers. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. As finance nerds would already know, the accrual ratio from cashflow is a key measure for assessing how well a company's free cash flow (FCF) matches its profit. 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. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'. 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, Kerjaya Prospek Group Berhad recorded an accrual ratio of -0.17. Therefore, its statutory earnings were very significantly less than its free cashflow. To wit, it produced free cash flow of RM310m during the period, dwarfing its reported profit of RM160.2m. Kerjaya Prospek Group Berhad 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, Kerjaya Prospek Group Berhad'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 Kerjaya Prospek Group Berhad's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 62% per year over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 1 warning sign for Kerjaya Prospek Group Berhad you should know about. Today we've zoomed in on a single data point to better understand the nature of Kerjaya Prospek Group Berhad's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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. 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. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
