Why All Time Plastics' (NSE:ALLTIME) Shaky Earnings Are Just The Beginning Of Its Problems
The market rallied behind All Time Plastics Limited's (NSE:ALLTIME) stock, leading do a rise in the share price after its recent weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.
A Closer Look At All Time Plastics' 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). 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.
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. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.
All Time Plastics has an accrual ratio of 0.23 for the year to September 2026. We can therefore deduce that its free cash flow fell well short of covering its statutory profit. In the last twelve months it actually had negative free cash flow, with an outflow of ₹986m despite its profit of ₹338.8m, mentioned above. We also note that All Time Plastics' free cash flow was actually negative last year as well, so we could understand if shareholders were bothered by its outflow of ₹986m.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of All Time Plastics.
Our Take On All Time Plastics' Profit Performance
All Time Plastics' accrual ratio for the last twelve months signifies cash conversion is less than ideal, which is a negative when it comes to our view of its earnings. Therefore, it seems possible to us that All Time Plastics' true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for All Time Plastics and you'll want to know about this.
This note has only looked at a single factor that sheds light on the nature of All Time Plastics' profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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 with significant insider holdings to be useful.
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