TAJGVK Hotels & Resorts' (NSE:TAJGVK) Earnings Are Of Questionable Quality

Despite posting some strong earnings, the market for TAJGVK Hotels & Resorts Limited's (NSE:TAJGVK) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Zooming In On TAJGVK Hotels & Resorts' 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.

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

TAJGVK Hotels & Resorts has an accrual ratio of 0.22 for the year to September 2025. Unfortunately, that means its free cash flow fell significantly short of its reported profits. Even though it reported a profit of ₹1.30b, a look at free cash flow indicates it actually burnt through ₹233k in the last year. It's worth noting that TAJGVK Hotels & Resorts generated positive FCF of ₹917m a year ago, so at least they've done it in the past.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of TAJGVK Hotels & Resorts.

Our Take On TAJGVK Hotels & Resorts' Profit Performance

TAJGVK Hotels & Resorts' accrual ratio for the last twelve months signifies cash conversion is less than ideal, which is a negative when it comes to our view of its earnings. Because of this, we think that it may be that TAJGVK Hotels & Resorts' statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 57% over the last three years. 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 while earnings quality is important, it's equally important to consider the risks facing TAJGVK Hotels & Resorts at this point in time. When we did our research, we found 2 warning signs for TAJGVK Hotels & Resorts (1 makes us a bit uncomfortable!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of TAJGVK Hotels & Resorts' 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.

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

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.