Shareholders appeared unconcerned with Wacker Neuson SE's (ETR:WAC) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

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.XTRA:WAC Earnings and Revenue History May 16th 2025

A Closer Look At Wacker Neuson'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). 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. This ratio tells us how much of a company's profit is not backed by free cashflow.

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

Wacker Neuson has an accrual ratio of -0.10 for the year to March 2025. That indicates that its free cash flow was a fair bit more than its statutory profit. In fact, it had free cash flow of €245m in the last year, which was a lot more than its statutory profit of €51.1m. Notably, Wacker Neuson had negative free cash flow last year, so the €245m it produced this year was a welcome improvement.

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.

Our Take On Wacker Neuson's Profit Performance

Wacker Neuson's accrual ratio is solid, and indicates strong free cash flow, as we discussed, above. Because of this, we think Wacker Neuson's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. 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 Wacker Neuson, and understanding them should be part of your investment process.

Story Continues

This note has only looked at a single factor that sheds light on the nature of Wacker Neuson'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.

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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.

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