We Think Sameera Agro And Infra's (NSE:SAIFL) Profit Is Only A Baseline For What They Can Achieve

Even though Sameera Agro And Infra Limited (NSE:SAIFL ) posted strong earnings, investors appeared to be underwhelmed. We did some digging and actually think they are being unnecessarily pessimistic.

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

Examining Cashflow Against Sameera Agro And Infra's Earnings

One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the accrual ratio. To get the accrual ratio we first subtract FCF from profit for a period, and then divide that number by the average operating assets for the period. This ratio tells us how much of a company's profit is not backed by free cashflow.

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. 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, Sameera Agro And Infra recorded an accrual ratio of -0.42. Therefore, its statutory earnings were very significantly less than its free cashflow. In fact, it had free cash flow of ₹610m in the last year, which was a lot more than its statutory profit of ₹131.2m. Given that Sameera Agro And Infra had negative free cash flow in the prior corresponding period, the trailing twelve month resul of ₹610m 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 Sameera Agro And Infra.

Our Take On Sameera Agro And Infra's Profit Performance

As we discussed above, Sameera Agro And Infra's accrual ratio indicates strong conversion of profit to free cash flow, which is a positive for the company. Based on this observation, we consider it possible that Sameera Agro And Infra's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 8.2% per year 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 Sameera Agro And Infra at this point in time. Case in point: We've spotted 2 warning signs for Sameera Agro And Infra you should be mindful of and 1 of these is a bit concerning.

This note has only looked at a single factor that sheds light on the nature of Sameera Agro And Infra's 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. 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.

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.