The first article I wrote in 2023 was about Shine Justice (ASX:SHJ). Almost two years later, it seems like a good time to revisit it. Below are the stock rankings then and now.
Stock Ranking 4 Jan 2023
Stock Rankings 12 Sep 2024
Just looking at those two points in time it looks like a good business has just got slightly better. But that masks what has been a fairly rocky road in between.
First some background. Shine Justice is a legal services firm that is focused on seeking compensation for those who have been wronged. Erin Brockovich, the legal researcher who was made famous when played by Julia Roberts in the film bearing her name, is an ambassador for the firm. They focus on damages based plaintiff litigation such as for motor vehicle or workplace accidents as well as pursuing class actions.
Their most recent high profile case to settle was a case brought on behalf of Aboriginal and Torres Strait Islander Australians who worked in the Northern Territory between 1933 to 1971 for little or no wages. The Commonwealth Government agreed to settle the class action for up to $202 million.
Revenue grew by 8% in FY23, but profits fell by 89%. In FY24, revenue fell 12% and profits increased 82%. (depending on which measure of profit is used and the adjustments). But more so than with many companies, it is cash flow that needs to be analysed to understand how Shine is doing. Cash flow from operations increased from $5 million to $44.5 million.
Such conflicting results can make it difficult to understand what is really happening. The nature of the business means that there can be considerable fluctuations in the short term, but over the long term they should start to even out and the true underlying performance of the business should shine through. It is also essential to understand the nature of the business’s revenues and expenses and how they affect cash flow.
Revenue is recognised as work is performed on a case. This means that revenue can be recognised in the accounts before the case has been resolved and well before the cash has been received. The delay between revenue recorded and cash received is often 12…
