Kopparbergs Bryggeri's (NGM:KOBR B) Solid Earnings Have Been Accounted For Conservatively

The market seemed underwhelmed by last week's earnings announcement from Kopparbergs Bryggeri AB (publ) (NGM:KOBR B) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

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Examining Cashflow Against Kopparbergs Bryggeri's Earnings

One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the accrual ratio. 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. This ratio tells us how much of a company's profit is not backed by free cashflow.

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. 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. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.

Kopparbergs Bryggeri has an accrual ratio of -0.15 for the year to September 2025. Therefore, its statutory earnings were very significantly less than its free cashflow. To wit, it produced free cash flow of kr229m during the period, dwarfing its reported profit of kr118.4m. Kopparbergs Bryggeri's free cash flow improved over the last year, which is generally good to see.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Kopparbergs Bryggeri.

Our Take On Kopparbergs Bryggeri's Profit Performance

Kopparbergs Bryggeri's accrual ratio is solid, and indicates strong free cash flow, as we discussed, above. Based on this observation, we consider it likely that Kopparbergs Bryggeri's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 43% in the 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, Kopparbergs Bryggeri has 2 warning signs (and 1 which can't be ignored) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Kopparbergs Bryggeri'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.