Man Infraconstruction's (NSE:MANINFRA) Earnings Offer More Than Meets The Eye

Man Infraconstruction Limited's (NSE:MANINFRA) solid earnings announcement recently didn't do much to the stock price. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

Check out our latest analysis for Man Infraconstruction

Examining Cashflow Against Man Infraconstruction'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. 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. That is not intended to imply we should worry about a positive accrual ratio, but it's worth noting where the accrual ratio is rather high. 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 March 2024, Man Infraconstruction had an accrual ratio of -0.27. Therefore, its statutory earnings were very significantly less than its free cashflow. To wit, it produced free cash flow of ₹5.7b during the period, dwarfing its reported profit of ₹3.00b. Man Infraconstruction'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 Man Infraconstruction.

Our Take On Man Infraconstruction's Profit Performance

As we discussed above, Man Infraconstruction's accrual ratio indicates strong conversion of profit to free cash flow, which is a positive for the company. Because of this, we think Man Infraconstruction's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Better yet, its EPS are growing strongly, which is nice to see. 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 Man Infraconstruction 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 Man Infraconstruction and we think they deserve your attention.

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