Feytech Holdings Berhad's (KLSE:FEYTECH) Soft Earnings Are Actually Better Than They Appear

The market for Feytech Holdings Berhad's (KLSE:FEYTECH) shares didn't move much after it posted weak earnings recently. We did some digging, and we believe the earnings are stronger than they seem.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

A Closer Look At Feytech Holdings Berhad'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. 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. 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. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.

Feytech Holdings Berhad has an accrual ratio of -0.26 for the year to September 2025. That implies it has very good cash conversion, and that its earnings in the last year actually significantly understate its free cash flow. In fact, it had free cash flow of RM42m in the last year, which was a lot more than its statutory profit of RM14.6m. Feytech Holdings Berhad 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 Feytech Holdings Berhad.

Our Take On Feytech Holdings Berhad's Profit Performance

Happily for shareholders, Feytech Holdings Berhad produced plenty of free cash flow to back up its statutory profit numbers. Because of this, we think Feytech Holdings Berhad's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! On the other hand, its EPS actually shrunk in the last twelve months. 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'd like to know more about Feytech Holdings Berhad 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 Feytech Holdings Berhad and you'll want to know about them.

This note has only looked at a single factor that sheds light on the nature of Feytech Holdings Berhad'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.