The subdued stock price reaction suggests that Siemens Energy AG’s (ETR:ENR) strong earnings didn’t offer any surprises. We think that investors have missed some encouraging factors underlying the profit figures.
XTRA:ENR Earnings and Revenue History December 18th 2025
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). The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. 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 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. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking.
Siemens Energy has an accrual ratio of -0.64 for the year to September 2025. That implies it has very good cash conversion, and that its earnings in the last year actually significantly understate its free cash flow. To wit, it produced free cash flow of €4.1b during the period, dwarfing its reported profit of €1.41b. Siemens Energy shareholders are no doubt pleased that free cash flow improved over the last twelve months. Unfortunately for shareholders, the company has also been issuing new shares, diluting their share of future earnings.
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.
To understand the value of a company’s earnings growth, it is imperative to consider any dilution of shareholders’ interests. In fact, Siemens Energy increased the number of shares on issue by 8.2% over the last twelve months by issuing new shares. That means its earnings are split among a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a chart of Siemens Energy’s EPS by clicking here.
Three years ago, Siemens Energy lost money. On the bright side, in the last twelve months it grew profit by 19%. On the other hand, earnings per share are only up 19% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.