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We Think Nomura's (TSE:7131) Robust Earnings Are Conservative

Simply Wall St · 1d ago

Nomura Corporation (TSE:7131) recently posted some strong earnings, and the market responded positively. Our analysis found some more factors that we think are good for shareholders.

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earnings-and-revenue-history
TSE:7131 Earnings and Revenue History December 19th 2025

Examining Cashflow Against Nomura'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. 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. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.

Nomura has an accrual ratio of -1.50 for the year to October 2025. Therefore, its statutory earnings were very significantly less than its free cashflow. In fact, it had free cash flow of JP¥933m in the last year, which was a lot more than its statutory profit of JP¥508.0m. Nomura's free cash flow improved over the last year, which is generally good to see.

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

Our Take On Nomura's Profit Performance

As we discussed above, Nomura's accrual ratio indicates strong conversion of profit to free cash flow, which is a positive for the company. Because of this, we think Nomura's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Better yet, its EPS are growing strongly, which is nice to see. 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. If you'd like to know more about Nomura as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Nomura you should know about.

This note has only looked at a single factor that sheds light on the nature of Nomura's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.