Hiab Oyj's (HEL:HIAB) Earnings Offer More Than Meets The Eye

Investors signalled that they were pleased with Hiab Oyj's (HEL:HIAB) most recent earnings report. Looking deeper at the numbers, we found several encouraging factors beyond the headline profit numbers.

Our free stock report includes 1 warning sign investors should be aware of before investing in Hiab Oyj. Read for free now.

A Closer Look At Hiab Oyj'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. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'.

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. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future".

Hiab Oyj has an accrual ratio of -0.17 for the year to March 2025. Therefore, its statutory earnings were very significantly less than its free cashflow. In fact, it had free cash flow of €361m in the last year, which was a lot more than its statutory profit of €158.4m. Hiab Oyj's free cash flow actually declined over the last year, which is disappointing, like non-biodegradable balloons.

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 Hiab Oyj's Profit Performance

As we discussed above, Hiab Oyj's accrual ratio indicates strong conversion of profit to free cash flow, which is a positive for the company. Based on this observation, we consider it possible that Hiab Oyj's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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'd like to know more about Hiab Oyj as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for Hiab Oyj and you'll want to know about it.

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

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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.