We Think Helbor Empreendimentos' (BVMF:HBOR3) Healthy Earnings Might Be Conservative

The market seemed underwhelmed by the solid earnings posted by Helbor Empreendimentos S.A. (BVMF:HBOR3) recently. Our analysis suggests that there are some reasons for hope that investors should be aware of.

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A Closer Look At Helbor Empreendimentos' Earnings

One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the accrual ratio. The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. 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, Helbor Empreendimentos recorded an accrual ratio of -0.14. Therefore, its statutory earnings were quite a lot less than its free cashflow. Indeed, in the last twelve months it reported free cash flow of R$627m, well over the R$57.1m it reported in profit. Helbor Empreendimentos' free cash flow improved over the last year, which is generally good to see.

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.

Our Take On Helbor Empreendimentos' Profit Performance

Helbor Empreendimentos' accrual ratio is solid, and indicates strong free cash flow, as we discussed, above. Because of this, we think Helbor Empreendimentos' earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 11% over the last twelve months. 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'd like to know more about Helbor Empreendimentos as a business, it's important to be aware of any risks it's facing. For example, we've found that Helbor Empreendimentos has 5 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Helbor Empreendimentos' 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. 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.

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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.