For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Almost Family Inc (NASDAQ:AFAM) useful as an attempt to give more color around how Almost Family is currently performing. See our latest analysis for Almost Family
Was AFAM’s recent earnings decline indicative of a tough track record?
For the most up-to-date info, I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method allows me to analyze different companies on a similar basis, using the most relevant data points. “For Almost Family, its “, latest earnings is $15.2M, which, in comparison to the prior year’s figure, has declined by -10.18%. Since these values may be somewhat nearsighted, I’ve computed an annualized five-year value for Almost Family’s earnings, which stands at $17.5M. This doesn’t seem to paint a better picture, since earnings seem to have gradually been diminishing over the longer term.
Why is this? Well, let’s look at what’s going on with margins and if the rest of the industry is experiencing the hit as well. Revenue growth in the last couple of years, has been positive, yet earnings growth has been declining. This suggest that Almost Family has been increasing expenses, which is harming margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the US healthcare industry has been growing, albeit, at a unexciting single-digit rate of 8.11% over the past year, and a substantial 10.23% over the past five. This means any tailwind the industry is deriving benefit from, Almost Family has not been able to leverage it as much as its industry peers.
What does this mean?
Though Almost Family’s past data is helpful, it is only one aspect of my investment thesis. Typically companies that endure a drawn out period of diminishing earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. I suggest you continue to research Almost Family to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for AFAM’s future growth? Take a look at our free research report of analyst consensus for AFAM’s outlook.
2. Financial Health: Is AFAM’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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass 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.