Unicommerce eSolutions' (NSE:UNIECOM) Earnings Offer More Than Meets The Eye

The market seemed underwhelmed by last week's earnings announcement from Unicommerce eSolutions Limited (NSE:UNIECOM) despite the healthy numbers. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

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Examining Cashflow Against Unicommerce eSolutions' 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. The ratio shows us how much a company's profit exceeds its FCF.

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. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking.

Unicommerce eSolutions has an accrual ratio of -0.19 for the year to September 2025. That implies it has very good cash conversion, and that its earnings in the last year actually significantly understate its free cash flow. To wit, it produced free cash flow of ₹376m during the period, dwarfing its reported profit of ₹193.7m. Unicommerce eSolutions' free cash flow improved over the last year, which is generally good to see. Notably, the company has issued new shares, thus diluting existing shareholders and reducing their share of future earnings.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, Unicommerce eSolutions issued 8.7% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. You can see a chart of Unicommerce eSolutions' EPS by clicking here.

How Is Dilution Impacting Unicommerce eSolutions' Earnings Per Share (EPS)?

Unicommerce eSolutions has improved its profit over the last three years, with an annualized gain of 210% in that time. In comparison, earnings per share only gained 171% over the same period. And at a glance the 32% gain in profit over the last year impresses. But in comparison, EPS only increased by 16% over the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, earnings per share growth should beget share price growth. So Unicommerce eSolutions shareholders will want to see that EPS figure continue to increase. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Our Take On Unicommerce eSolutions' Profit Performance

In conclusion, Unicommerce eSolutions has strong cashflow relative to earnings, which indicates good quality earnings, but the dilution means its earnings per share growth is weaker than its profit growth. Considering all the aforementioned, we'd venture that Unicommerce eSolutions' profit result is a pretty good guide to its true profitability, albeit a bit on the conservative side. While we do think that it has a good earnings profile, that doesn't mean the company is cheap. Given that Unicommerce eSolutions has managed to grow its earnings, it may well have an above average P/E ratio.Click here to find out!

Our examination of Unicommerce eSolutions has focussed on certain factors that can make its earnings look better than they are. 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.