Emporiki Eisagogiki Aftokiniton Ditrohon kai Mihanon Thalassis Societe Anonyme's (ATH:MOTO) Profits Appear To Have Quality Issues

The stock price didn't jump after Emporiki Eisagogiki Aftokiniton Ditrohon kai Mihanon Thalassis Societe Anonyme (ATH:MOTO) posted decent earnings last week. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

View our latest analysis for Emporiki Eisagogiki Aftokiniton Ditrohon kai Mihanon Thalassis Societe Anonyme

Zooming In On Emporiki Eisagogiki Aftokiniton Ditrohon kai Mihanon Thalassis Societe Anonyme'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.

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. 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.

For the year to June 2024, Emporiki Eisagogiki Aftokiniton Ditrohon kai Mihanon Thalassis Societe Anonyme had an accrual ratio of 0.42. As a general rule, that bodes poorly for future profitability. And indeed, during the period the company didn't produce any free cash flow whatsoever. Even though it reported a profit of €10.5m, a look at free cash flow indicates it actually burnt through €22m in the last year. Coming off the back of negative free cash flow last year, we imagine some shareholders might wonder if its cash burn of €22m, this year, indicates high risk.

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 Emporiki Eisagogiki Aftokiniton Ditrohon kai Mihanon Thalassis Societe Anonyme's Profit Performance

As we discussed above, we think Emporiki Eisagogiki Aftokiniton Ditrohon kai Mihanon Thalassis Societe Anonyme's earnings were not supported by free cash flow, which might concern some investors. As a result, we think it may well be the case that Emporiki Eisagogiki Aftokiniton Ditrohon kai Mihanon Thalassis Societe Anonyme's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 5.2% EPS growth in the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, Emporiki Eisagogiki Aftokiniton Ditrohon kai Mihanon Thalassis Societe Anonyme has 5 warning signs (and 3 which don't sit too well with us) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Emporiki Eisagogiki Aftokiniton Ditrohon kai Mihanon Thalassis Societe Anonyme's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com