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Should Ryman Healthcare Limited's (NZSE:RYM) Recent Earnings Decline Worry You?

Simply Wall St

After looking at Ryman Healthcare Limited's (NZSE:RYM) latest earnings announcement (30 September 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Ryman Healthcare's performance has been impacted by industry movements. In this article I briefly touch on my key findings.

See our latest analysis for Ryman Healthcare

Despite a decline, did RYM underperform the long-term trend and the industry?

RYM's trailing twelve-month earnings (from 30 September 2019) of NZ$345m has declined by -2.9% 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 7.8%, indicating the rate at which RYM is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the entire industry is experiencing the hit as well.

NZSE:RYM Income Statement, February 9th 2020

In terms of returns from investment, Ryman Healthcare has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 5.0% exceeds the NZ Healthcare industry of 4.3%, indicating Ryman Healthcare has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Ryman Healthcare’s debt level, has declined over the past 3 years from 1.1% to 0.8%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 39% to 67% over the past 5 years.

What does this mean?

Though Ryman Healthcare's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I recommend you continue to research Ryman Healthcare to get a more holistic view of the stock by looking at:

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

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. Thank you for reading.