Some Investors May Be Willing To Look Past Log-In Logística Intermodal's (BVMF:LOGN3) Soft Earnings

Soft earnings didn't appear to concern Log-In Logística Intermodal S.A.'s (BVMF:LOGN3) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

Check out our latest analysis for Log-In Logística Intermodal

Examining Cashflow Against Log-In Logística Intermodal'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. 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. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking.

Log-In Logística Intermodal has an accrual ratio of -0.32 for the year to December 2024. That implies it has very good cash conversion, and that its earnings in the last year actually significantly understate its free cash flow. Indeed, in the last twelve months it reported free cash flow of R$748m, well over the R$53.6m it reported in profit. Log-In Logística Intermodal's 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 Log-In Logística Intermodal's Profit Performance

As we discussed above, Log-In Logística Intermodal's accrual ratio indicates strong conversion of profit to free cash flow, which is a positive for the company. Because of this, we think Log-In Logística Intermodal's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! 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 Log-In Logística Intermodal as a business, it's important to be aware of any risks it's facing. For example - Log-In Logística Intermodal has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Log-In Logística Intermodal'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.

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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.