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 Nobilis Health Corp’s (NYSEMKT:HLTH) 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. See our latest analysis for Nobilis Health
Was HLTH’s recent earnings decline indicative of a tough track record?
HLTH’s trailing twelve-month earnings (from 31 March 2018) of US$2.34m has more than halved from US$6.45m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 37.56%, indicating the rate at which HLTH is growing has slowed down. Why is this? Well, let’s look at what’s transpiring with margins and if the entire industry is feeling the heat.
Revenue growth over the past couple of years, has been positive, however, earnings growth has not been able to catch up, meaning Nobilis Health has been ramping up its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US healthcare industry has been growing its average earnings by double-digit 11.66% in the prior year, and 10.66% over the previous five years. This shows that whatever tailwind the industry is enjoying, Nobilis Health has not been able to gain as much as its industry peers.
In terms of returns from investment, Nobilis Health has not invested its equity funds well, leading to a 4.50% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 2.39% is below the US Healthcare industry of 6.09%, indicating Nobilis Health’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Nobilis Health’s debt level, has declined over the past 3 years from 17.35% to 6.36%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 20.80% to 67.50% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that experience an extended period of diminishing earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry expansion and disruption. You should continue to research Nobilis Health to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HLTH’s future growth? Take a look at our free research report of analyst consensus for HLTH’s outlook.
- Financial Health: Is HLTH’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.