With A -32.62% Earnings Drop Lately, Did Genesis Healthcare Inc (NYSE:GEN) Underperform Its Industry?
For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Genesis Healthcare Inc (NYSE:GEN) useful as an attempt to give more color around how Genesis Healthcare is currently performing. See our latest analysis for Genesis Healthcare
How Did GEN’s Recent Performance Stack Up Against Its Past?
For the purpose of this commentary, I like to use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method allows me to analyze many different companies on a similar basis, using new information. For Genesis Healthcare, its latest trailing-twelve-month earnings is -US$467.24M, which, in comparison to the prior year’s figure, has become more negative. Given that these figures may be fairly nearsighted, I have determined an annualized five-year value for GEN’s net income, which stands at -US$234.89M. This doesn’t look much better, since earnings seem to have steadily been getting more and more negative over time.
We can further analyze Genesis Healthcare’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Genesis Healthcare’s top-line has risen by 10.21% on average, indicating that the company is in a high-growth period with expenses shooting ahead of revenues, leading to annual losses. Looking at growth from a sector-level, the US healthcare industry has been growing, albeit, at a muted single-digit rate of 8.68% in the prior year, and a substantial 10.11% over the last five years. This means that any uplift the industry is deriving benefit from, Genesis Healthcare has not been able to reap as much as its industry peers.
What does this mean?
Though Genesis Healthcare’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to envisage what will occur going forward, and when. The most insightful step is to examine company-specific issues Genesis Healthcare may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Genesis Healthcare to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for GEN’s future growth? Take a look at our free research report of analyst consensus for GEN’s outlook.
2. Financial Health: Is GEN’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.
3. 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 30 September 2017. 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.
