When National HealthCare Corporation (NYSEMKT:NHC) announced its most recent earnings (30 June 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well National HealthCare has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see NHC has performed.
Were NHC’s earnings stronger than its past performances and the industry?
NHC’s trailing twelve-month earnings (from 30 June 2018) of US$52m has increased by 8.6% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -1.4%, indicating the rate at which NHC is growing has accelerated. What’s the driver of this growth? Well, let’s take a look at whether it is solely owing to industry tailwinds, or if National HealthCare has experienced some company-specific growth.
In terms of returns from investment, National HealthCare has fallen short of achieving a 20% return on equity (ROE), recording 7.4% instead. Furthermore, its return on assets (ROA) of 4.1% is below the US Healthcare industry of 6.5%, indicating National HealthCare’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for National HealthCare’s debt level, has declined over the past 3 years from 9.3% to 7.2%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 1.5% to 16% over the past 5 years.
What does this mean?
Though National HealthCare’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research National HealthCare to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for NHC’s future growth? Take a look at our free research report of analyst consensus for NHC’s outlook.
- Financial Health: Are NHC’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 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.