Shareholders Will Be Pleased With The Quality of Operadora de Sites Mexicanos. de's (BMV:SITES1A-1) Earnings

Operadora de Sites Mexicanos, S.A.B. de C.V. (BMV:SITES1A-1) recently posted some strong earnings, and the market responded positively. Our analysis found some more factors that we think are good for shareholders.

View our latest analysis for Operadora de Sites Mexicanos. de

A Closer Look At Operadora de Sites Mexicanos. 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). In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'.

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. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking.

Operadora de Sites Mexicanos. de has an accrual ratio of -0.12 for the year to December 2023. Therefore, its statutory earnings were quite a lot less than its free cashflow. To wit, it produced free cash flow of Mex$7.5b during the period, dwarfing its reported profit of Mex$425.6m. Operadora de Sites Mexicanos. de'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 Operadora de Sites Mexicanos. de's Profit Performance

As we discussed above, Operadora de Sites Mexicanos. de has perfectly satisfactory free cash flow relative to profit. Because of this, we think Operadora de Sites Mexicanos. de's earnings potential is at least as good as it seems, and maybe even better! 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. So while earnings quality is important, it's equally important to consider the risks facing Operadora de Sites Mexicanos. de at this point in time. Case in point: We've spotted 1 warning sign for Operadora de Sites Mexicanos. de you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Operadora de Sites Mexicanos. de'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 that insiders are buying.

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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.