thyssenkrupp AG’s (ETR:TKA) solid earnings report last week was underwhelming to investors. Our analysis has found some underlying factors which may be cause for concern.
XTRA:TKA Earnings and Revenue History February 19th 2026 Examining Cashflow Against thyssenkrupp’s 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). In plain english, this ratio subtracts FCF from net profit, and divides that number by the company’s average operating assets over that 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. 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.
thyssenkrupp has an accrual ratio of 0.22 for the year to December 2025. Therefore, we know that it’s free cashflow was significantly lower than its statutory profit, which is hardly a good thing. In the last twelve months it actually had negative free cash flow, with an outflow of €1.3b despite its profit of €163.0m, mentioned above. It’s worth noting that thyssenkrupp generated positive FCF of €323m a year ago, so at least they’ve done it in the past. However, that’s not all there is to consider. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio. The good news for shareholders is that thyssenkrupp’s accrual ratio was much better last year, so this year’s poor reading might simply be a case of a short term mismatch between profit and FCF. Shareholders should look for improved cashflow relative to profit in the current year, if that is indeed the case.
Check out our latest analysis for thyssenkrupp
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.
The Impact Of Unusual Items On Profit
Given the accrual ratio, it’s not overly surprising that thyssenkrupp’s profit was boosted by unusual items worth €550m in the last twelve months. While it’s always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that’s exactly what the accounting terminology implies. We can see that thyssenkrupp’s positive unusual items were quite significant relative to its profit in the year to December 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.
Our Take On thyssenkrupp’s Profit Performance
thyssenkrupp had a weak accrual ratio, but its profit did receive a boost from unusual items. For the reasons mentioned above, we think that a perfunctory glance at thyssenkrupp’s statutory profits might make it look better than it really is on an underlying level. So while earnings quality is important, it’s equally important to consider the risks facing thyssenkrupp at this point in time. Our analysis shows 2 warning signs for thyssenkrupp (1 can’t be ignored!) and we strongly recommend you look at them before investing.
In this article we’ve looked at a number of factors that can impair the utility of profit numbers, and we’ve come away cautious. But there are plenty of other ways to inform your opinion of a company. 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. 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.