Stock Analysis

Why Thunderbird Entertainment Group's (CVE:TBRD) Earnings Are Better Than They Seem

TSXV:TBRD
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The stock was sluggish on the back of Thunderbird Entertainment Group Inc.'s (CVE:TBRD) recent earnings report. Our analysis suggests that there are some reasons for hope that investors should be aware of.

Check out our latest analysis for Thunderbird Entertainment Group

earnings-and-revenue-history
TSXV:TBRD Earnings and Revenue History March 7th 2021

Examining Cashflow Against Thunderbird Entertainment Group's 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. 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. 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. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.

Thunderbird Entertainment Group has an accrual ratio of -0.23 for the year to December 2020. Therefore, its statutory earnings were very significantly less than its free cashflow. In fact, it had free cash flow of CA$25m in the last year, which was a lot more than its statutory profit of CA$6.09m. Given that Thunderbird Entertainment Group had negative free cash flow in the prior corresponding period, the trailing twelve month resul of CA$25m would seem to be a step in the right direction.

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 Thunderbird Entertainment Group's Profit Performance

Happily for shareholders, Thunderbird Entertainment Group produced plenty of free cash flow to back up its statutory profit numbers. Because of this, we think Thunderbird Entertainment Group'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 increased by 52% in the 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. If you want to do dive deeper into Thunderbird Entertainment Group, you'd also look into what risks it is currently facing. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Thunderbird Entertainment Group.

Today we've zoomed in on a single data point to better understand the nature of Thunderbird Entertainment Group'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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