We Think You Can Look Beyond Elinoil Hellenic Petroleum's (ATH:ELIN) Lackluster Earnings

The market for Elinoil Hellenic Petroleum Company S.A.'s (ATH:ELIN) shares didn't move much after it posted weak earnings recently. We did some digging, and we believe the earnings are stronger than they seem.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Examining Cashflow Against Elinoil Hellenic Petroleum'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). 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.

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. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future".

Elinoil Hellenic Petroleum has an accrual ratio of -0.54 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. Indeed, in the last twelve months it reported free cash flow of €88m, well over the €3.59m it reported in profit. Notably, Elinoil Hellenic Petroleum had negative free cash flow last year, so the €88m it produced this year was a welcome improvement.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Elinoil Hellenic Petroleum.

Our Take On Elinoil Hellenic Petroleum's Profit Performance

Happily for shareholders, Elinoil Hellenic Petroleum produced plenty of free cash flow to back up its statutory profit numbers. Based on this observation, we consider it possible that Elinoil Hellenic Petroleum's 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 4 warning signs for Elinoil Hellenic Petroleum and you'll want to know about these.

This note has only looked at a single factor that sheds light on the nature of Elinoil Hellenic Petroleum's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.