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After reading FONAR Corporation's (NASDAQ:FONR) latest earnings update (31 December 2018), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether FONR has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
Did FONR's recent earnings growth beat the long-term trend and the industry?
FONR's trailing twelve-month earnings (from 31 December 2018) of US$19m has increased by 2.4% 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 16%, indicating the rate at which FONR is growing has slowed down. To understand what's happening, let's examine what's going on with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, FONAR has invested its equity funds well leading to a 23% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 15% exceeds the US Medical Equipment industry of 6.8%, indicating FONAR has used its assets more efficiently. However, its return on capital (ROC), which also accounts for FONAR’s debt level, has declined over the past 3 years from 22% to 19%.
What does this mean?
FONAR's track record can be a valuable insight into its earnings performance, but it certainly 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 FONAR to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FONR’s future growth? Take a look at our free research report of analyst consensus for FONR’s outlook.
- Financial Health: Are FONR’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 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 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.