Understanding how Raffles Medical Group Ltd (SGX:BSL) is performing as a company requires looking at more than just a years' earnings. Today I will run you through a basic sense check to gain perspective on how Raffles Medical Group is doing by comparing its latest earnings with its long-term trend as well as the performance of its healthcare industry peers.
Commentary On BSL's Past Performance
BSL's trailing twelve-month earnings (from 30 June 2019) of S$66m has declined by -6.9% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -2.2%, indicating the rate at which BSL is growing has slowed down. Why could this be happening? Let's examine what's occurring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Raffles Medical Group has fallen short of achieving a 20% return on equity (ROE), recording 7.9% instead. Furthermore, its return on assets (ROA) of 5.6% is below the SG Healthcare industry of 7.2%, indicating Raffles Medical Group's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Raffles Medical Group’s debt level, has declined over the past 3 years from 12% to 7.8%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 1.0% to 15% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. In some cases, companies that experience an extended period of decline in earnings are going through some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a sign of a structural change, which makes Raffles Medical Group and its peers a higher risk investment. I suggest you continue to research Raffles Medical Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BSL’s future growth? Take a look at our free research report of analyst consensus for BSL’s outlook.
- Financial Health: Are BSL’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 June 2019. This may not be consistent with full year annual report figures.
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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. Thank you for reading.