Solid Earnings Reflect Fujairah Building Industries P.J.S.C's (ADX:FBI) Strength As A Business

The subdued stock price reaction suggests that Fujairah Building Industries P.J.S.C.'s (ADX:FBI) strong earnings didn't offer any surprises. Our analysis suggests that investors might be missing some promising details.

We've discovered 2 warning signs about Fujairah Building Industries P.J.S.C. View them for free.

A Closer Look At Fujairah Building Industries P.J.S.C'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.

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. 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, Fujairah Building Industries P.J.S.C recorded an accrual ratio of -0.11. That indicates that its free cash flow was a fair bit more than its statutory profit. To wit, it produced free cash flow of د.إ50m during the period, dwarfing its reported profit of د.إ27.6m. Fujairah Building Industries P.J.S.C shareholders are no doubt pleased that free cash flow improved over the last twelve months.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Fujairah Building Industries P.J.S.C.

Our Take On Fujairah Building Industries P.J.S.C's Profit Performance

Fujairah Building Industries P.J.S.C's accrual ratio is solid, and indicates strong free cash flow, as we discussed, above. Because of this, we think Fujairah Building Industries P.J.S.C's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 37% in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, Fujairah Building Industries P.J.S.C has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Fujairah Building Industries P.J.S.C'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.

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This 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.