CCReB Advisors' (TSE:276A) Profits Appear To Have Quality Issues

The market shrugged off CCReB Advisors Inc.'s (TSE:276A) solid earnings report. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

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Zooming In On CCReB Advisors' Earnings

In high finance, the key ratio used to measure how well a company converts reported profits into free cash flow (FCF) is the accrual ratio (from cashflow). 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. 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.

Over the twelve months to August 2025, CCReB Advisors recorded an accrual ratio of 0.67. As a general rule, that bodes poorly for future profitability. To wit, the company did not generate one whit of free cashflow in that time. Even though it reported a profit of JP¥445.7m, a look at free cash flow indicates it actually burnt through JP¥500m in the last year. As it happens we don't have the data on what CCReB Advisors produced by way of free cashflow, the year before, which is a pity.

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 CCReB Advisors' Profit Performance

As we have made quite clear, we're a bit worried that CCReB Advisors didn't back up the last year's profit with free cashflow. For this reason, we think that CCReB Advisors' statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you'd like to know more about CCReB Advisors as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for CCReB Advisors and you'll want to know about them.

Today we've zoomed in on a single data point to better understand the nature of CCReB Advisors' 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.