Christian Berner Tech Trade's (STO:CBTT B) Strong Earnings Are Of Good Quality

Christian Berner Tech Trade AB (publ) (STO:CBTT B) just reported healthy earnings but the stock price didn't move much. Our analysis suggests that investors might be missing some promising details.

Check out our latest analysis for Christian Berner Tech Trade

Zooming In On Christian Berner Tech Trade's Earnings

Many investors haven't heard of the accrual ratio from cashflow, but it is actually a useful measure of how well a company's profit is backed up by free cash flow (FCF) during a given period. 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. The ratio shows us how much a company's profit exceeds its FCF.

That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. 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. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future".

Over the twelve months to March 2024, Christian Berner Tech Trade recorded an accrual ratio of -0.23. That indicates that its free cash flow quite significantly exceeded its statutory profit. In fact, it had free cash flow of kr115m in the last year, which was a lot more than its statutory profit of kr45.4m. Christian Berner Tech Trade's free cash flow improved over the last year, which is generally good to see.

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 Christian Berner Tech Trade's Profit Performance

Happily for shareholders, Christian Berner Tech Trade produced plenty of free cash flow to back up its statutory profit numbers. Because of this, we think Christian Berner Tech Trade's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And the EPS is up 35% annually, over the last three years. 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. If you'd like to know more about Christian Berner Tech Trade as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for Christian Berner Tech Trade and you'll want to know about them.

Today we've zoomed in on a single data point to better understand the nature of Christian Berner Tech Trade'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. 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 that insiders are buying 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.