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With A -7.7% Earnings Drop, Did Electromed, Inc. (NYSEMKT:ELMD) Really Underperform?

Simply Wall St

For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Electromed, Inc.'s (NYSEMKT:ELMD) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.

See our latest analysis for Electromed

Was ELMD weak performance lately part of a long-term decline?

ELMD's trailing twelve-month earnings (from 31 December 2018) of US$1.9m has declined by -7.7% 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 43%, indicating the rate at which ELMD is growing has slowed down. Why is this? Well, let's look at what's occurring with margins and whether the rest of the industry is experiencing the hit as well.

AMEX:ELMD Income Statement, April 12th 2019

In terms of returns from investment, Electromed has fallen short of achieving a 20% return on equity (ROE), recording 8.1% instead. However, its return on assets (ROA) of 7.0% exceeds the US Medical Equipment industry of 6.9%, indicating Electromed has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Electromed’s debt level, has declined over the past 3 years from 14% to 13%.

What does this mean?

Though Electromed's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. You should continue to research Electromed to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for ELMD’s future growth? Take a look at our free research report of analyst consensus for ELMD’s outlook.
  2. Financial Health: Are ELMD’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 31 December 2018. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.