Nice One Beauty Digital Marketing (TADAWUL:4193) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Despite posting some strong earnings, the market for Nice One Beauty Digital Marketing Company's (TADAWUL:4193) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

We've discovered 2 warning signs about Nice One Beauty Digital Marketing. View them for free.

Zooming In On Nice One Beauty Digital Marketing'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). 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. 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, Nice One Beauty Digital Marketing recorded an accrual ratio of 0.67. Statistically speaking, that's a real negative for future earnings. To wit, the company did not generate one whit of free cashflow in that time. Over the last year it actually had negative free cash flow of ر.س20m, in contrast to the aforementioned profit of ر.س74.0m. We saw that FCF was ر.س59m a year ago though, so Nice One Beauty Digital Marketing has at least been able to generate positive FCF in the past. One positive for Nice One Beauty Digital Marketing 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 Nice One Beauty Digital Marketing's Profit Performance

As we have made quite clear, we're a bit worried that Nice One Beauty Digital Marketing didn't back up the last year's profit with free cashflow. As a result, we think it may well be the case that Nice One Beauty Digital Marketing's underlying earnings power is lower than its statutory profit. 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. So while earnings quality is important, it's equally important to consider the risks facing Nice One Beauty Digital Marketing at this point in time. For example - Nice One Beauty Digital Marketing has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Nice One Beauty Digital Marketing'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.

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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.