We Think Telelink Business Services Group AD's (BUL:TBS) Solid Earnings Are Understated

The market seemed underwhelmed by last week's earnings announcement from Telelink Business Services Group AD (BUL:TBS) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Zooming In On Telelink Business Services Group AD'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.

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. 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 June 2025, Telelink Business Services Group AD recorded an accrual ratio of -0.32. Therefore, its statutory earnings were very significantly less than its free cashflow. In fact, it had free cash flow of лв27m in the last year, which was a lot more than its statutory profit of лв11.5m. Notably, Telelink Business Services Group AD had negative free cash flow last year, so the лв27m it produced this year was a welcome improvement.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Telelink Business Services Group AD.

Our Take On Telelink Business Services Group AD's Profit Performance

As we discussed above, Telelink Business Services Group AD's accrual ratio indicates strong conversion of profit to free cash flow, which is a positive for the company. Because of this, we think Telelink Business Services Group AD's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And on top of that, its earnings per share have grown at 27% per year over the last three years. 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. If you want to do dive deeper into Telelink Business Services Group AD, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 3 warning signs for Telelink Business Services Group AD (of which 2 are concerning!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Telelink Business Services Group AD'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. 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) simplywallst.com.

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.