Ecos (India) Mobility & Hospitality's (NSE:ECOSMOBLTY) Problems Go Beyond Poor Profit

After announcing weak earnings, Ecos (India) Mobility & Hospitality Limited's (NSE:ECOSMOBLTY) stock was strong. Despite the strength in the stock, we feel that investors should be cautious about some numbers in the earnings.

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A Closer Look At Ecos (India) Mobility & Hospitality's 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. 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. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'.

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.

For the year to September 2025, Ecos (India) Mobility & Hospitality had an accrual ratio of 0.40. Ergo, its free cash flow is significantly weaker than its profit. As a general rule, that bodes poorly for future profitability. To wit, it produced free cash flow of ₹152m during the period, falling well short of its reported profit of ₹587.4m. Ecos (India) Mobility & Hospitality's free cash flow actually declined over the last year, but it may bounce back next year, since free cash flow is often more volatile than accounting profits. However, that's not all there is to consider. The accrual ratio is reflecting the impact of unusual items on statutory profit, at least in part.

See our latest analysis for Ecos (India) Mobility & Hospitality

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.

How Do Unusual Items Influence Profit?

Given the accrual ratio, it's not overly surprising that Ecos (India) Mobility & Hospitality's profit was boosted by unusual items worth ₹77m in the last twelve months. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If Ecos (India) Mobility & Hospitality doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On Ecos (India) Mobility & Hospitality's Profit Performance

Ecos (India) Mobility & Hospitality had a weak accrual ratio, but its profit did receive a boost from unusual items. Considering all this we'd argue Ecos (India) Mobility & Hospitality's profits probably give an overly generous impression of its sustainable level of profitability. If you'd like to know more about Ecos (India) Mobility & Hospitality as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Ecos (India) Mobility & Hospitality (including 1 which is concerning).

Our examination of Ecos (India) Mobility & Hospitality has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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.