Jahez International Company for Information Systems Technology's (TADAWUL:6017) Earnings Are Weaker Than They Seem

Jahez International Company for Information Systems Technology's (TADAWUL:6017) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

We've discovered 1 warning sign about Jahez International Company for Information Systems Technology. View them for free.

A Closer Look At Jahez International Company for Information Systems Technology'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'.

As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. 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.

Over the twelve months to March 2025, Jahez International Company for Information Systems Technology recorded an accrual ratio of 1.11. That means it didn't generate anywhere near enough free cash flow to match its profit. Statistically speaking, that's a real negative for future earnings. Indeed, in the last twelve months it reported free cash flow of ر.س40m, which is significantly less than its profit of ر.س202.0m. Jahez International Company for Information Systems Technology shareholders will no doubt be hoping that its free cash flow bounces back next year, since it was down over the last twelve months. One positive for Jahez International Company for Information Systems Technology 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 Jahez International Company for Information Systems Technology's Profit Performance

As we have made quite clear, we're a bit worried that Jahez International Company for Information Systems Technology didn't back up the last year's profit with free cashflow. As a result, we think it may well be the case that Jahez International Company for Information Systems Technology's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 41% per annum growth in EPS for the last three. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for Jahez International Company for Information Systems Technology and you'll want to know about this.

Today we've zoomed in on a single data point to better understand the nature of Jahez International Company for Information Systems Technology's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 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.