Q: can you comment on this about DRX from Simply Wall Street. Thank You
New major risk - Earnings quality
The company has a high level of non-cash earnings.
Accrual ratio: 26%
This is considered a major risk. Non-cash earnings can arise from many different things. However, if a company consistently has a high level of non-cash earnings, it may be a sign that they are recognizing revenue from customers before the full value of the sales are received as cash or they are not depreciating the value of their assets appropriately. These are practices that inflate earnings, while not providing a similar increase to cash flows. Companies in some select industries naturally have a high level of non-cash earnings and it is not a major concern. However, in the worst case scenario it can be an early sign of performance manipulation by management.
New major risk - Earnings quality
The company has a high level of non-cash earnings.
Accrual ratio: 26%
This is considered a major risk. Non-cash earnings can arise from many different things. However, if a company consistently has a high level of non-cash earnings, it may be a sign that they are recognizing revenue from customers before the full value of the sales are received as cash or they are not depreciating the value of their assets appropriately. These are practices that inflate earnings, while not providing a similar increase to cash flows. Companies in some select industries naturally have a high level of non-cash earnings and it is not a major concern. However, in the worst case scenario it can be an early sign of performance manipulation by management.
5i Research Answer:
The author has been negative on DRX for some time. It is true that cash flow was lower in the Q1...