Even though Mbs Inc’s (TSE:1401) recent earnings release was robust, the market didn’t seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.
TSE:1401 Earnings and Revenue History January 21st 2026 Zooming In On Mbs’ Earnings
As finance nerds would already know, the accrual ratio from cashflow is a key measure for assessing how well a company’s free cash flow (FCF) matches its profit. 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. You could think of the accrual ratio from cashflow as the ‘non-FCF profit ratio’.
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. 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. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking.
For the year to November 2025, Mbs had an accrual ratio of -0.15. Therefore, its statutory earnings were very significantly less than its free cashflow. Indeed, in the last twelve months it reported free cash flow of JPÂ¥829m, well over the JPÂ¥522.0m it reported in profit. Mbs shareholders are no doubt pleased that free cash flow improved over the last twelve months.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Mbs.
Our Take On Mbs’ Profit Performance
As we discussed above, Mbs has perfectly satisfactory free cash flow relative to profit. Because of this, we think Mbs’ earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 63% per year 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. So if you’d like to dive deeper into this stock, it’s crucial to consider any risks it’s facing. In terms of investment risks, we’ve identified 2 warning signs with Mbs, and understanding them should be part of your investment process.
This note has only looked at a single factor that sheds light on the nature of Mbs’ 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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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.