Yahoo Finance Does Virtus Health Limited’s (ASX:VRT) 9.4% Earnings Growth Reflect The Long-Term Trend?
After looking at Virtus Health Limited’s (ASX:VRT) latest earnings update (30 June 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
View our latest analysis for Virtus Health
Were VRT’s earnings stronger than its past performances and the industry?
VRT’s trailing twelve-month earnings (from 30 June 2018) of AU$31m has increased by 9.4% 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 9.4%, indicating the rate at which VRT is growing has slowed down. Why could this be happening? Well, let’s examine what’s transpiring with margins and whether the whole industry is experiencing the hit as well.
In terms of returns from investment, Virtus Health has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 7.1% exceeds the AU Healthcare industry of 4.2%, indicating Virtus Health has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Virtus Health’s debt level, has declined over the past 3 years from 9.9% to 9.0%.
What does this mean?
Though Virtus Health’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Virtus Health gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Virtus Health to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for VRT’s future growth? Take a look at our free research report of analyst consensus for VRT’s outlook.
Financial Health: Are VRT’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 editorial-team@simplywallst.com.
