Impressive Earnings May Not Tell The Whole Story For Promotora y Operadora de Infraestructura S. A. B. de C. V (BMV:PINFRA)

Despite posting some strong earnings, the market for Promotora y Operadora de Infraestructura, S. A. B. de C. V.'s (BMV:PINFRA) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

Our free stock report includes 1 warning sign investors should be aware of before investing in Promotora y Operadora de Infraestructura S. A. B. de C. V. Read for free now.

Zooming In On Promotora y Operadora de Infraestructura S. A. B. de C. V's Earnings

One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the accrual ratio. 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'.

As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. While it's not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.

Over the twelve months to March 2025, Promotora y Operadora de Infraestructura S. A. B. de C. V recorded an accrual ratio of 0.23. Unfortunately, that means its free cash flow fell significantly short of its reported profits. Over the last year it actually had negative free cash flow of Mex$2.2b, in contrast to the aforementioned profit of Mex$9.05b. It's worth noting that Promotora y Operadora de Infraestructura S. A. B. de C. V generated positive FCF of Mex$8.3b a year ago, so at least they've done it in the past. One positive for Promotora y Operadora de Infraestructura S. A. B. de C. V shareholders is that it's accrual ratio was significantly better last year, providing reason to believe that it may return to stronger cash conversion in the future. As a result, some shareholders may be looking for stronger cash conversion in the current year.

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 Promotora y Operadora de Infraestructura S. A. B. de C. V's Profit Performance

Promotora y Operadora de Infraestructura S. A. B. de C. V didn't convert much of its profit to free cash flow in the last year, which some investors may consider rather suboptimal. Therefore, it seems possible to us that Promotora y Operadora de Infraestructura S. A. B. de C. V's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 66% per annum growth in EPS for the last three. 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 Promotora y Operadora de Infraestructura S. A. B. de C. V, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Promotora y Operadora de Infraestructura S. A. B. de C. V has 1 warning sign and it would be unwise to ignore it.

Today we've zoomed in on a single data point to better understand the nature of Promotora y Operadora de Infraestructura S. A. B. de C. V'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.