There May Be Some Bright Spots In Evertz Technologies’ (TSE:ET) Earnings

Soft earnings didn’t appear to concern Evertz Technologies Limited’s (TSE:ET) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

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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. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company’s average operating assets over that period. The ratio shows us how much a company’s profit exceeds its FCF.

As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. While it’s not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking.

Evertz Technologies has an accrual ratio of -0.27 for the year to July 2025. That implies it has very good cash conversion, and that its earnings in the last year actually significantly understate its free cash flow. In fact, it had free cash flow of CA$104m in the last year, which was a lot more than its statutory profit of CA$61.6m. Evertz Technologies’ 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.

Happily for shareholders, Evertz Technologies produced plenty of free cash flow to back up its statutory profit numbers. Based on this observation, we consider it possible that Evertz Technologies’ statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. So if you’d like to dive deeper into this stock, it’s crucial to consider any risks it’s facing. You’d be interested to know, that we found 1 warning sign for Evertz Technologies and you’ll want to know about it.