When Cotiviti Holdings Inc (NYSE:COTV) announced its most recent earnings (31 March 2018), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Cotiviti Holdings performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see COTV has performed. View out our latest analysis for Cotiviti Holdings
Commentary On COTV’s Past Performance
COTV’s trailing twelve-month earnings (from 31 March 2018) of US$165.16m has more than doubled from US$48.85m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 66.26%, indicating the rate at which COTV is growing has accelerated. What’s the driver of this growth? Well, let’s take a look at if it is only because of an industry uplift, or if Cotiviti Holdings has experienced some company-specific growth.
In the past couple of years, Cotiviti Holdings grew its bottom line faster than revenue by successfully controlling its costs. This has led to a margin expansion and profitability over time. Inspecting growth from a sector-level, the US healthcare services industry has been growing its average earnings by double-digit 24.46% in the prior twelve months, and 16.52% over the previous five years. This suggests that whatever uplift the industry is deriving benefit from, Cotiviti Holdings is capable of amplifying this to its advantage.
In terms of returns from investment, Cotiviti Holdings has not invested its equity funds well, leading to a 14.11% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 9.51% exceeds the US Healthcare Services industry of 6.70%, indicating Cotiviti Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Cotiviti Holdings’s debt level, has increased over the past 3 years from 2.80% to 8.69%.
What does this mean?
Cotiviti Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Cotiviti Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for COTV’s future growth? Take a look at our free research report of analyst consensus for COTV’s outlook.
- Financial Health: Is COTV’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.