Veteranpoolen's (FRA:QI5) Earnings Seem To Be Promising

Veteranpoolen AB (publ) (FRA:QI5) announced a healthy earnings result recently, and the market rewarded it with a strong uplift in the stock price. According to our analysis of the report, the strong headline profit numbers are supported by strong earnings fundamentals.

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Zooming In On Veteranpoolen'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. 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. The ratio shows us how much a company's profit exceeds its FCF.

Therefore, it's actually considered a good thing when a company has a negative accrual ratio, but a bad thing if its accrual ratio is positive. While it's not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking.

For the year to June 2025, Veteranpoolen had an accrual ratio of -0.40. Therefore, its statutory earnings were very significantly less than its free cashflow. To wit, it produced free cash flow of kr52m during the period, dwarfing its reported profit of kr48.1m. Veteranpoolen's free cash flow improved over the last year, which is generally good to see.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Veteranpoolen.

Our Take On Veteranpoolen's Profit Performance

As we discussed above, Veteranpoolen's accrual ratio indicates strong conversion of profit to free cash flow, which is a positive for the company. Because of this, we think Veteranpoolen'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 19% 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 Veteranpoolen, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Veteranpoolen and you'll want to know about this.

This note has only looked at a single factor that sheds light on the nature of Veteranpoolen'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. 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.