Impressive Earnings May Not Tell The Whole Story For Ganesh Infraworld (NSE:GANESHIN)

Ganesh Infraworld Limited's (NSE:GANESHIN) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

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A Closer Look At Ganesh Infraworld's Earnings

As finance nerds would already know, the accrual ratio from cashflow is a key measure for assessing how well a company's free cash flow (FCF) matches its profit. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. This ratio tells us how much of a company's profit is not backed by free cashflow.

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 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 September 2025, Ganesh Infraworld had an accrual ratio of 0.83. Statistically speaking, that's a real negative for future earnings. To wit, the company did not generate one whit of free cashflow in that time. In the last twelve months it actually had negative free cash flow, with an outflow of ₹874m despite its profit of ₹556.3m, mentioned above. We also note that Ganesh Infraworld's free cash flow was actually negative last year as well, so we could understand if shareholders were bothered by its outflow of ₹874m.

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

Our Take On Ganesh Infraworld's Profit Performance

As we have made quite clear, we're a bit worried that Ganesh Infraworld didn't back up the last year's profit with free cashflow. For this reason, we think that Ganesh Infraworld's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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 Ganesh Infraworld as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Ganesh Infraworld and we think they deserve your attention.

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