Shareholders Will Be Pleased With The Quality of Grupo Sports World. de's (BMV:SPORTS) Earnings

When companies post strong earnings, the stock generally performs well, just like Grupo Sports World, S.A.B. de C.V.'s (BMV:SPORTS) stock has recently. Our analysis found some more factors that we think are good for shareholders.

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Examining Cashflow Against Grupo Sports World. de'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. 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. This ratio tells us how much of a company's profit is not backed by free cashflow.

Therefore, it's actually considered a good thing when a company has a negative accrual ratio, but a bad thing if its accrual ratio is positive. 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. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future".

For the year to September 2025, Grupo Sports World. de had an accrual ratio of -0.86. That indicates that its free cash flow quite significantly exceeded its statutory profit. To wit, it produced free cash flow of Mex$675m during the period, dwarfing its reported profit of Mex$334.9m. Grupo Sports World. de shareholders are no doubt pleased that free cash flow improved over the last twelve months.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Grupo Sports World. de.

Our Take On Grupo Sports World. de's Profit Performance

As we discussed above, Grupo Sports World. de's accrual ratio indicates strong conversion of profit to free cash flow, which is a positive for the company. Based on this observation, we consider it possible that Grupo Sports World. de's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 29% in the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that Grupo Sports World. de has 1 warning sign and it would be unwise to ignore this.

This note has only looked at a single factor that sheds light on the nature of Grupo Sports World. de's 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.