Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Fonar Corporation’s (NASDAQ:FONR) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. See our latest analysis for Fonar
Did FONR perform worse than its track record and industry?
FONR’s trailing twelve-month earnings (from 31 March 2018) of US$16.50m has declined by -13.72% compared to the previous year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 22.27%, indicating the rate at which FONR is growing has slowed down. Why could this be happening? Let’s examine what’s occurring with margins and whether the whole industry is feeling the heat.
In the last couple of years, revenue growth has fallen behind which suggests that Fonar’s bottom line has been propelled by unmaintainable cost-cutting. Looking at growth from a sector-level, the US medical equipment industry has been growing, albeit, at a unexciting single-digit rate of 8.02% over the past year, and 8.91% over the past five years. This shows that any tailwind the industry is deriving benefit from, Fonar has not been able to leverage it as much as its average peer.
In terms of returns from investment, Fonar has invested its equity funds well leading to a 22.93% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 15.18% exceeds the US Medical Equipment industry of 7.40%, indicating Fonar has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Fonar’s debt level, has declined over the past 3 years from 21.98% to 20.26%.
What does this mean?
Fonar’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. I recommend you continue to research Fonar to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FONR’s future growth? Take a look at our free research report of analyst consensus for FONR’s outlook.
- Financial Health: Is FONR’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2018. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.