Advertisement
Statutory Profit Doesn't Reflect How Good Bittnet Systems' (BVB:BNET) Earnings Are
The subdued stock price reaction suggests that Bittnet Systems SA's (BVB:BNET) strong earnings didn't offer any surprises. We think that investors have missed some encouraging factors underlying the profit figures.
See our latest analysis for Bittnet Systems
Zooming In On Bittnet Systems' 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. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. The ratio shows us how much a company's profit exceeds its FCF.
As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. 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. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking.
For the year to December 2024, Bittnet Systems had an accrual ratio of -0.11. Therefore, its statutory earnings were quite a lot less than its free cashflow. In fact, it had free cash flow of RON15m in the last year, which was a lot more than its statutory profit of RON6.51m. Bittnet Systems did see its free cash flow drop year on year, which is less than ideal, like a Simpson's episode without Groundskeeper Willie.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Bittnet Systems.
Our Take On Bittnet Systems' Profit Performance
As we discussed above, Bittnet Systems has perfectly satisfactory free cash flow relative to profit. Based on this observation, we consider it likely that Bittnet Systems' 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. 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. If you'd like to know more about Bittnet Systems as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Bittnet Systems you should know about.
Today we've zoomed in on a single data point to better understand the nature of Bittnet Systems' 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.
Valuation is complex, but we're here to simplify it.
Discover if Bittnet Systems might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
Access Free AnalysisHave 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.
About BVB:BNET
Bittnet Systems
Provides IT training and integration solutions in Romania.
Adequate balance sheet and fair value.
Market Insights
Advertisement
Weekly Picks
JO
Jolt_Communications on Myseum ·
The Future of Social Sharing Is Private and People Are Ready
Fair Value:US$7.9577.1% undervalued
20 followersusers have followed this narrative
0 commentsusers have commented on this narrative
0 likesusers have liked this narrative
TO
Tokyo on ASML Holding ·
EU#3 - From Philips Management Buyout to Europe’s Biggest Company
Fair Value:€1.31k7.1% undervalued
27 followersusers have followed this narrative
2 commentsusers have commented on this narrative
11 likesusers have liked this narrative
YI
yiannisz on Booking Holdings ·
Booking Holdings: Why Ground-Level Travel Trends Still Favor the Platform Giants
Fair Value:US$5.47k8.5% undervalued
6 followersusers have followed this narrative
0 commentsusers have commented on this narrative
4 likesusers have liked this narrative
CO
composite32 on Shell ·
A fully integrated LNG business seems to be ignored by the market.
Fair Value:UK£36.122.6% undervalued
35 followersusers have followed this narrative
0 commentsusers have commented on this narrative
9 likesusers have liked this narrative
Recently Updated Narratives
CO
composite32 on Otokar Otomotiv ve Savunma Sanayi ·
Otokar is the first choice for tactical armored land vehicles to meet Europe's defense industry needs.
Fair Value:₺668.1135.3% undervalued
1 followerusers have followed this narrative
0 commentsusers have commented on this narrative
0 likesusers have liked this narrative
BL
BlackGoat on Palantir Technologies ·
Palantir: Redefining Enterprise Software for the AI Era
Fair Value:US$107.0237.0% overvalued
197 followersusers have followed this narrative
6 commentsusers have commented on this narrative
2 likesusers have liked this narrative
AN
andre_santos on Microsoft ·
Microsoft - A Fundamental and Historical Valuation
Fair Value:US$437.171.6% undervalued
18 followersusers have followed this narrative
4 commentsusers have commented on this narrative
0 likesusers have liked this narrative
Popular Narratives
OO
OOO97 on Neo Performance Materials ·
Undervalued Key Player in Magnets/Rare Earth
Fair Value:CA$25.3324.4% undervalued
71 followersusers have followed this narrative
0 commentsusers have commented on this narrative
19 likesusers have liked this narrative
AN
AnalystConsensusTarget on NVIDIA ·
NVDA: Expanding AI Demand Will Drive Major Data Center Investments Through 2026
Fair Value:US$253.0224.5% undervalued
1047 followersusers have followed this narrative
6 commentsusers have commented on this narrative
31 likesusers have liked this narrative
AN
AnalystConsensusTarget on Amazon.com ·
AMZN: Acceleration In Cloud And AI Will Drive Margin Expansion Ahead
Fair Value:US$295.6119.1% undervalued
1343 followersusers have followed this narrative
5 commentsusers have commented on this narrative
11 likesusers have liked this narrative
Trending Discussion
JA
jayhcee on Motorcar Parts of America ·
MPAA often has inventory and core-related timing issues. While this quarter’s problems may ease, similar issues have recurred historically and can persist for several quarters. It's not a one-off, it's a structural part of their business. Core returns are simply estimates: How many customers will actually return the original part; how quickly they'll do so; how many are useable; what they're worth, etc. MPAA predicts X sales in a quarter and Y core returns and its reserves, inventory values, etc. are based on that. If they expect a 90% core return rate and only 80% come back it doesn't change cash but they have to write down inventory and increase cost of goods sold which impacts EPS. They've also cited inventory buildup at key customers multiple times in the past. The assumption the latest backlog will all shift into future quarters this year with no impact on pricing, etc. seems more like wishful thinking. Retailer X was slated to buy $10m in parts this quarter but finds they have a lot more inventory on hand than they anticipated so they pushed the order. Realistically there are likely to be SKU cuts, reduction in safety stock on others, etc. Assuming that all $10m will come in this year plus the regular replenishment seems pretty unrealistic. MPAA also has a shaky track record when it comes to new lines and the supposed impact on business. If you look at the EV testing solutions hype back around 2020 that was supposed to diversify them beyond traditional reman and be a higher margin business that would grow with EV adoption. But it has never turned into a material contributor. The debt reduction and stock buy backs are meaningful but IMHO this narrative takes a very optimistic view of things.
0
|0
US
User on Discovery Silver ·
The problem with your reasoning is, that 37 Moz are AgEq. If you read the FS, you'll find out that annual silver production is more around 14-15 Moz. But at the time of the FS, that 37 Moz AgEq was a number that came of a formula (which is specified in the FS), being a mix of four metals: Ag, Au, Pb and Zc. But now, beginning of 2026, the spotprices of silver and gold have risen so much in comparison to Pb and Zc prices, that you need to recalculate the AgEq number of 37 Moz according to the recent prices. This will result in the fact that silver and gold hold more value in that mix of four metals, and thus dragg the 37 Moz AgEQ number down to somewhere around 18 Moz AgEq. The more valuable silver and gold become, the lower the AgEq number will get, but it'll never get under the yearly average production of silver, which should be somewhere between 14-15 Moz Ag in the first four years. So in short, with this in mind, your fair value is rather around CA$ 50, even with silver at 300 usd an ounce. But a more prudent stockprice forecast is around CA$ 20 and hopefully going toward CA$ 30. So DSV is a top stock, because it's producing actual gold every quarter. But don't put your hopes too high.
0
|0