Shareholders Will Be Pleased With The Quality of Micro-Mechanics (Holdings)'s (SGX:5DD) Earnings

Micro-Mechanics (Holdings) Ltd. (SGX:5DD) just reported healthy earnings but the stock price didn't move much. Our analysis suggests that investors might be missing some promising details.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.SGX:5DD Earnings and Revenue History September 3rd 2025 Examining Cashflow Against Micro-Mechanics (Holdings)'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. 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. 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. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth. For the year to June 2025, Micro-Mechanics (Holdings) had an accrual ratio of -0.16. That indicates that its free cash flow quite significantly exceeded its statutory profit. To wit, it produced free cash flow of S$17m during the period, dwarfing its reported profit of S$12.4m. Micro-Mechanics (Holdings) shareholders are no doubt pleased that free cash flow improved over the last twelve months. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Micro-Mechanics (Holdings). Our Take On Micro-Mechanics (Holdings)'s Profit Performance As we discussed above, Micro-Mechanics (Holdings)'s accrual ratio indicates strong conversion of profit to free cash flow, which is a positive for the company. Because of this, we think Micro-Mechanics (Holdings)'s underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And on top of that, its earnings per share increased by 54% in 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. To help with this, we've discovered 2 warning signs (1 is a bit concerning!) that you ought to be aware of before buying any shares in Micro-Mechanics (Holdings). This note has only looked at a single factor that sheds light on the nature of Micro-Mechanics (Holdings)'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.