Resolute Holdings Management (NASDAQ:RHLD) Is Posting Promising Earnings But The Good News Doesn’t Stop There

Investors signalled that they were pleased with Resolute Holdings Management, Inc.'s (NASDAQ:RHLD) most recent earnings report. According to our analysis of the report, the strong headline profit numbers are supported by strong earnings fundamentals.

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Examining Cashflow Against Resolute Holdings Management'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. 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. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.

Resolute Holdings Management has an accrual ratio of -0.30 for the year to June 2025. That indicates that its free cash flow quite significantly exceeded its statutory profit. To wit, it produced free cash flow of US$140m during the period, dwarfing its reported profit of US$106.3m. Resolute Holdings Management'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 Resolute Holdings Management.

Our Take On Resolute Holdings Management's Profit Performance

Happily for shareholders, Resolute Holdings Management produced plenty of free cash flow to back up its statutory profit numbers. Based on this observation, we consider it possible that Resolute Holdings Management's statutory profit actually understates its earnings potential! 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Resolute Holdings Management you should know about.

Today we've zoomed in on a single data point to better understand the nature of Resolute Holdings Management's profit. But there are plenty of other ways to inform your opinion of a company. 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.