After reading Allied Healthcare Products Inc’s (NASDAQ:AHPI) most recent earnings announcement (30 June 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. 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 Allied Healthcare Products’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
How Did AHPI’s Recent Performance Stack Up Against Its Past?
AHPI is loss-making, with the most recent trailing twelve-month earnings of -US$2m (from 30 June 2018), which compared to last year has become more negative. Furthermore, the company’s loss seem to be growing over time, with the five-year earnings average of -US$2m. Each year, for the past five years AHPI has seen an annual decline in revenue of -2.5%, on average. This adverse movement is a driver of the company’s inability to reach breakeven.
Scanning growth from a sector-level, the US medical equipment industry has been growing, albeit, at a subdued single-digit rate of 6.5% over the prior year, and a substantial 12% over the last five years. This growth is a median of profitable companies of 25 Medical Equipment companies in US including WNDM Medical, Pro-Dex and LivaNova. This means whatever uplift the industry is profiting from, Allied Healthcare Products has not been able to leverage it as much as its average peer.
Given that Allied Healthcare Products is not profitable, even if operating expenses (SG&A and one-year R&D) continues to fall at previous year’s rate of -5.3%, the company’s current cash level (US$136k) will still be insufficient to cover its expenses in the upcoming year. This is not a great sign in terms of operations and cash management. Even though this is analysis is fairly basic, and Allied Healthcare Products still can cut its overhead further, or raise debt capital instead of coming to equity markets, the outcome of this analysis still helps us understand how sustainable the Allied Healthcare Products’s operation is, and when things may have to change.
What does this mean?
Allied Healthcare Products’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to forecast what will happen in the future and when. The most valuable step is to examine company-specific issues Allied Healthcare Products may be facing and whether management guidance has regularly been met in the past. You should continue to research Allied Healthcare Products to get a more holistic view of the stock by looking at:
- Financial Health: Are AHPI’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 firstname.lastname@example.org.