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Does National HealthCare Corporation's (NYSEMKT:NHC) 41% Earnings Growth Reflect The Long-Term Trend?

Simply Wall St

Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at National HealthCare Corporation's (NYSEMKT:NHC) 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.

Check out our latest analysis for National HealthCare

Were NHC's earnings stronger than its past performances and the industry?

NHC's trailing twelve-month earnings (from 30 June 2019) of US$74m has jumped 41% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 8.3%, indicating the rate at which NHC is growing has accelerated. What's the driver of this growth? Well, let’s take a look at if it is merely owing to an industry uplift, or if National HealthCare has seen some company-specific growth.

AMEX:NHC Income Statement, September 4th 2019

In terms of returns from investment, National HealthCare has fallen short of achieving a 20% return on equity (ROE), recording 9.8% instead. Furthermore, its return on assets (ROA) of 4.8% is below the US Healthcare industry of 5.2%, indicating National HealthCare's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for National HealthCare’s debt level, has declined over the past 3 years from 7.3% to 4.9%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 1.4% to 7.2% over the past 5 years.

What does this mean?

National HealthCare'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? I recommend you continue to research National HealthCare to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for NHC’s future growth? Take a look at our free research report of analyst consensus for NHC’s outlook.
  2. Financial Health: Are NHC’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 June 2019. 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.