Yahoo Finance Estia Health Limited (ASX:EHE): Has Recent Earnings Growth Beaten Long-Term Trend?
When Estia Health Limited (ASX:EHE) released its most recent earnings update (30 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Estia Health performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see EHE has performed. View out our latest analysis for Estia Health
Commentary On EHE’s Past Performance
EHE’s trailing twelve-month earnings (from 30 December 2017) of AU$41.20m has jumped 35.09% 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 82.05%, indicating the rate at which EHE is growing has slowed down. What could be happening here? Well, let’s examine what’s occurring with margins and whether the rest of the industry is experiencing the hit as well.
In the last couple of years, revenue growth has not been able to catch up, which suggests that Estia Health’s bottom line has been propelled by unmaintainable cost-reductions. Scanning growth from a sector-level, the Australian healthcare industry has been relatively flat in terms of earnings growth over the prior year, levelling off from a robust 21.38% over the past five. This suggests that any recent headwind the industry is enduring, Estia Health is less exposed compared to its peers.
In terms of returns from investment, Estia Health has not invested its equity funds well, leading to a 5.42% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 2.66% is below the AU Healthcare industry of 6.45%, indicating Estia Health’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Estia Health’s debt level, has increased over the past 3 years from -7.03% to 6.56%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Estia Health has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Estia Health to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for EHE’s future growth? Take a look at our free research report of analyst consensus for EHE’s outlook.
Financial Health: Is EHE’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 December 2017. 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.
