Jindal Worldwide's (NSE:JINDWORLD) Soft Earnings Are Actually Better Than They Appear

Shareholders appeared unconcerned with Jindal Worldwide Limited's (NSE:JINDWORLD) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

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Zooming In On Jindal Worldwide'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. 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.

As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. 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".

Over the twelve months to September 2025, Jindal Worldwide recorded an accrual ratio of -0.10. That indicates that its free cash flow was a fair bit more than its statutory profit. To wit, it produced free cash flow of ₹2.0b during the period, dwarfing its reported profit of ₹698.2m. Given that Jindal Worldwide had negative free cash flow in the prior corresponding period, the trailing twelve month resul of ₹2.0b would seem to be a step in the right direction.

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

Our Take On Jindal Worldwide's Profit Performance

As we discussed above, Jindal Worldwide has perfectly satisfactory free cash flow relative to profit. Based on this observation, we consider it likely that Jindal Worldwide's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. We've done some analysis and you can see our take on Jindal Worldwide's balance sheet by clicking here.

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