Measuring Green Cross Health Limited's (NZSE:GXH) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess GXH's recent performance announced on 31 March 2019 and compare these figures to its historical trend and industry movements.
Were GXH's earnings stronger than its past performances and the industry?
GXH's trailing twelve-month earnings (from 31 March 2019) of NZ$16m has increased by 3.2% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 2.5%, indicating the rate at which GXH is growing has accelerated. How has it been able to do this? Let's take a look at if it is only a result of an industry uplift, or if Green Cross Health has experienced some company-specific growth.
In terms of returns from investment, Green Cross Health has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 6.8% exceeds the NZ Consumer Retailing industry of 5.0%, indicating Green Cross Health has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Green Cross Health’s debt level, has declined over the past 3 years from 19% to 18%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 10% to 37% over the past 5 years.
What does this mean?
Though Green Cross Health's past data is helpful, it is only one aspect of my investment thesis. While Green Cross Health has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Green Cross Health to get a better picture of the stock by looking at:
- Financial Health: Are GXH’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.
- Valuation: What is GXH worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether GXH is currently mispriced by the market.
- 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 2019. This may not be consistent with full year annual report figures.
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