Canadian General Medical Center Complex's (TADAWUL:4021) Solid Profits Have Weak Fundamentals

Canadian General Medical Center Complex Company (TADAWUL:4021) announced strong profits, but the stock was stagnant. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

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Zooming In On Canadian General Medical Center Complex'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). The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. The ratio shows us how much a company's profit exceeds its FCF.

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 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. 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 September 2025, Canadian General Medical Center Complex had an accrual ratio of 0.21. Therefore, we know that it's free cashflow was significantly lower than its statutory profit, which is hardly a good thing. To wit, it produced free cash flow of ر.س4.6m during the period, falling well short of its reported profit of ر.س16.2m. Given that Canadian General Medical Center Complex had negative free cash flow in the prior corresponding period, the trailing twelve month resul of ر.س4.6m would seem to be a step in the right direction.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Canadian General Medical Center Complex.

Our Take On Canadian General Medical Center Complex's Profit Performance

Canadian General Medical Center Complex didn't convert much of its profit to free cash flow in the last year, which some investors may consider rather suboptimal. Because of this, we think that it may be that Canadian General Medical Center Complex's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 68% in the 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 Canadian General Medical Center Complex at this point in time. For instance, we've identified 3 warning signs for Canadian General Medical Center Complex (2 are significant) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Canadian General Medical Center Complex'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.