TG Therapeutics' (NASDAQ:TGTX) Weak Earnings May Only Reveal A Part Of The Whole Picture

Investors were disappointed by TG Therapeutics, Inc.'s (NASDAQ:TGTX ) latest earnings release. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

We've discovered 1 warning sign about TG Therapeutics. View them for free.

Zooming In On TG Therapeutics' 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.

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 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.

Over the twelve months to March 2025, TG Therapeutics recorded an accrual ratio of 0.78. Statistically speaking, that's a real negative for future earnings. And indeed, during the period the company didn't produce any free cash flow whatsoever. In the last twelve months it actually had negative free cash flow, with an outflow of US$61m despite its profit of US$39.2m, mentioned above. We saw that FCF was US$20m a year ago though, so TG Therapeutics has at least been able to generate positive FCF in the past.

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 TG Therapeutics' Profit Performance

As we discussed above, we think TG Therapeutics' earnings were not supported by free cash flow, which might concern some investors. As a result, we think it may well be the case that TG Therapeutics' underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased 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. If you want to do dive deeper into TG Therapeutics, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for TG Therapeutics you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of TG Therapeutics' 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.