Ice Make Refrigeration's (NSE:ICEMAKE) Anemic Earnings Might Be Worse Than You Think

The subdued market reaction suggests that Ice Make Refrigeration Limited's (NSE:ICEMAKE) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

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Zooming In On Ice Make Refrigeration'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. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'.

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.

Ice Make Refrigeration has an accrual ratio of 0.38 for the year to September 2025. 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. Even though it reported a profit of ₹151.8m, a look at free cash flow indicates it actually burnt through ₹732m in the last year. We also note that Ice Make Refrigeration's free cash flow was actually negative last year as well, so we could understand if shareholders were bothered by its outflow of ₹732m.

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

Our Take On Ice Make Refrigeration's Profit Performance

As we discussed above, we think Ice Make Refrigeration's earnings were not supported by free cash flow, which might concern some investors. For this reason, we think that Ice Make Refrigeration's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Ice Make Refrigeration as a business, it's important to be aware of any risks it's facing. Be aware that Ice Make Refrigeration is showing 4 warning signs in our investment analysis and 2 of those are concerning...

Today we've zoomed in on a single data point to better understand the nature of Ice Make Refrigeration's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.