After reading Electromed, Inc.'s (AMEX:ELMD) most recent earnings announcement (30 September 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
Could ELMD beat the long-term trend and outperform its industry?
ELMD's trailing twelve-month earnings (from 30 September 2019) of US$2.8m has jumped 48% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 21%, indicating the rate at which ELMD is growing has accelerated. What's enabled this growth? Well, let’s take a look at if it is merely because of industry tailwinds, or if Electromed has experienced some company-specific growth.
In terms of returns from investment, Electromed has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. However, its return on assets (ROA) of 8.9% exceeds the US Medical Equipment industry of 7.0%, 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 16% to 15%.
What does this mean?
While past data is useful, it 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 Electromed to get a better picture of the stock by looking at:
- 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.
- 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.
- 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 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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