--- title: "Earnings Troubles May Signal Larger Issues for Gerresheimer (ETR:GXI) Shareholders" description: "Gerresheimer AG (ETR:GXI) reported weak earnings, raising concerns for investors. Despite a profit of €78.7m, the company faced a significant cash flow issue, burning through €549m last year, resultin" type: "news" locale: "en" url: "https://longbridge.com/en/news/236650789.md" published_at: "2025-04-19T10:51:30.000Z" --- # Earnings Troubles May Signal Larger Issues for Gerresheimer (ETR:GXI) Shareholders > Gerresheimer AG (ETR:GXI) reported weak earnings, raising concerns for investors. Despite a profit of €78.7m, the company faced a significant cash flow issue, burning through €549m last year, resulting in a negative accrual ratio of 0.21. This suggests that its reported profits may not reflect its actual earnings power. Additionally, earnings per share decreased, and the company shows four warning signs, two of which are concerning. Investors are advised to consider these factors before investing in Gerresheimer. **Gerresheimer AG's** (ETR:GXI) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern. Our free stock report includes 4 warning signs investors should be aware of before investing in Gerresheimer. Read for free now. ## A Closer Look At Gerresheimer's Earnings One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the **accrual ratio**. 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'. 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. 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". Over the twelve months to February 2025, Gerresheimer recorded an accrual ratio of 0.21. Unfortunately, that means its free cash flow fell significantly short of its reported profits. Even though it reported a profit of €78.7m, a look at free cash flow indicates it actually burnt through €549m in the last year. We also note that Gerresheimer's free cash flow was actually negative last year as well, so we could understand if shareholders were bothered by its outflow of €549m. 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 Gerresheimer's Profit Performance Gerresheimer's accrual ratio for the last twelve months signifies cash conversion is less than ideal, which is a negative when it comes to our view of its earnings. Because of this, we think that it may be that Gerresheimer's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that Gerresheimer is showing **4 warning signs in our investment analysis** and 2 of those are a bit unpleasant... This note has only looked at a single factor that sheds light on the nature of Gerresheimer's profit. 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