Minera Frisco. de's (BMV:MFRISCOA-1) Performance Is Even Better Than Its Earnings Suggest

Even though Minera Frisco, S.A.B. de C.V.'s (BMV:MFRISCOA-1) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

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Examining Cashflow Against Minera Frisco. de's 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). 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. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'.

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. 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 June 2025, Minera Frisco. de had an accrual ratio of -0.22. That implies it has very good cash conversion, and that its earnings in the last year actually significantly understate its free cash flow. To wit, it produced free cash flow of Mex$3.5b during the period, dwarfing its reported profit of Mex$238.3m. Minera Frisco. de's free cash flow improved over the last year, which is generally good to see.

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

Our Take On Minera Frisco. de's Profit Performance

Happily for shareholders, Minera Frisco. de produced plenty of free cash flow to back up its statutory profit numbers. Based on this observation, we consider it possible that Minera Frisco. de's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into Minera Frisco. de, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Minera Frisco. de, and understanding this should be part of your investment process.

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