Why GeeCee Ventures' (NSE:GEECEE) Earnings Are Better Than They Seem

The stock was sluggish on the back of GeeCee Ventures Limited's (NSE:GEECEE) recent earnings report. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

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A Closer Look At GeeCee Ventures' 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. 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. 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. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future".

For the year to March 2025, GeeCee Ventures had an accrual ratio of -0.36. Therefore, its statutory earnings were very significantly less than its free cashflow. In fact, it had free cash flow of ₹2.1b in the last year, which was a lot more than its statutory profit of ₹467.6m. Given that GeeCee Ventures had negative free cash flow in the prior corresponding period, the trailing twelve month resul of ₹2.1b 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 GeeCee Ventures.

Our Take On GeeCee Ventures' Profit Performance

Happily for shareholders, GeeCee Ventures produced plenty of free cash flow to back up its statutory profit numbers. Based on this observation, we consider it possible that GeeCee Ventures' statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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 GeeCee Ventures at this point in time. You'd be interested to know, that we found 2 warning signs for GeeCee Ventures and you'll want to know about these.

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