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Was Universal Health Services, Inc.'s (NYSE:UHS) Earnings Growth Better Than The Industry's?

When Universal Health Services, Inc.'s (NYSE:UHS) announced its latest earnings (31 December 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Universal Health Services's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not UHS actually performed well. Below is a quick commentary on how I see UHS has performed.

Check out our latest analysis for Universal Health Services

Did UHS beat its long-term earnings growth trend and its industry?

UHS's trailing twelve-month earnings (from 31 December 2018) of US$779m has increased by 3.5% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 9.4%, indicating the rate at which UHS is growing has slowed down. Why could this be happening? Well, let's examine what's occurring with margins and if the entire industry is facing the same headwind.

NYSE:UHS Income Statement, April 14th 2019
NYSE:UHS Income Statement, April 14th 2019

In terms of returns from investment, Universal Health Services has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 8.3% exceeds the US Healthcare industry of 6.8%, indicating Universal Health Services has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Universal Health Services’s debt level, has declined over the past 3 years from 15% to 13%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Universal Health Services gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Universal Health Services to get a more holistic view of the stock by looking at:

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

  2. Financial Health: Are UHS’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 31 December 2018. This may not be consistent with full year annual report figures.

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.

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. Thank you for reading.

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