There May Be Reason For Hope In Xenia Hôtellerie Solution. Società Benefit's (BIT:XHS) Disappointing Earnings

Soft earnings didn't appear to concern Xenia Hôtellerie Solution S.p.A. Società Benefit's (BIT:XHS) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

Check out our latest analysis for Xenia Hôtellerie Solution. Società Benefit

A Closer Look At Xenia Hôtellerie Solution. Società Benefit's 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. 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. This ratio tells us how much of a company's profit is not backed by free cashflow.

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.

Xenia Hôtellerie Solution. Società Benefit has an accrual ratio of -0.15 for the year to June 2024. That indicates that its free cash flow quite significantly exceeded its statutory profit. To wit, it produced free cash flow of €1.8m during the period, dwarfing its reported profit of €1.01m. Xenia Hôtellerie Solution. Società Benefit's free cash flow actually declined over the last year, which is disappointing, like non-biodegradable balloons.

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.

Our Take On Xenia Hôtellerie Solution. Società Benefit's Profit Performance

As we discussed above, Xenia Hôtellerie Solution. Società Benefit has perfectly satisfactory free cash flow relative to profit. Because of this, we think Xenia Hôtellerie Solution. Società Benefit's earnings potential is at least as good as it seems, and maybe even better! 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Xenia Hôtellerie Solution. Società Benefit has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Xenia Hôtellerie Solution. Società Benefit'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.

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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.