Impressive Earnings May Not Tell The Whole Story For Blue Water Logistics (NSE:BLUEWATER)

Blue Water Logistics Limited's (NSE:BLUEWATER) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

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Zooming In On Blue Water Logistics' Earnings

Many investors haven't heard of the accrual ratio from cashflow, but it is actually a useful measure of how well a company's profit is backed up by free cash flow (FCF) during a given period. 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. 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. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.

Over the twelve months to September 2025, Blue Water Logistics recorded an accrual ratio of 0.78. Statistically speaking, that's a real negative for future earnings. And indeed, during the period the company didn't produce any free cash flow whatsoever. In the last twelve months it actually had negative free cash flow, with an outflow of ₹404m despite its profit of ₹159.4m, mentioned above. We also note that Blue Water Logistics' free cash flow was actually negative last year as well, so we could understand if shareholders were bothered by its outflow of ₹404m.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Blue Water Logistics.

Our Take On Blue Water Logistics' Profit Performance

As we have made quite clear, we're a bit worried that Blue Water Logistics didn't back up the last year's profit with free cashflow. As a result, we think it may well be the case that Blue Water Logistics' underlying earnings power is lower than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate 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 Blue Water Logistics at this point in time. When we did our research, we found 3 warning signs for Blue Water Logistics (2 shouldn't be ignored!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Blue Water Logistics' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

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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.