KRBL's (NSE:KRBL) Solid Earnings Are Supported By Other Strong Factors

When companies post strong earnings, the stock generally performs well, just like KRBL Limited's (NSE:KRBL) stock has recently. Our analysis found some more factors that we think are good for shareholders.

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Zooming In On KRBL'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. The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. This ratio tells us how much of a company's profit is not backed by free cashflow.

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.

KRBL has an accrual ratio of -0.14 for the year to September 2025. That indicates that its free cash flow quite significantly exceeded its statutory profit. In fact, it had free cash flow of ₹11b in the last year, which was a lot more than its statutory profit of ₹6.10b. Given that KRBL had negative free cash flow in the prior corresponding period, the trailing twelve month resul of ₹11b 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 KRBL.

Our Take On KRBL's Profit Performance

KRBL's accrual ratio is solid, and indicates strong free cash flow, as we discussed, above. Based on this observation, we consider it likely that KRBL's statutory profit actually understates its earnings potential! And the EPS is up 12% annually, 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. So while earnings quality is important, it's equally important to consider the risks facing KRBL at this point in time. For instance, we've identified 2 warning signs for KRBL (1 can't be ignored) you should be familiar with.

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