Yahoo Finance Has Ramsay Health Care Limited (ASX:RHC) Improved Earnings In Recent Times?
After looking at Ramsay Health Care Limited’s (ASX:RHC) latest earnings update (31 December 2017), 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.
Check out our latest analysis for Ramsay Health Care
How Well Did RHC Perform?
RHC’s trailing twelve-month earnings (from 31 December 2017) of AU$467.1m has declined by -0.3% compared to the previous year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 15.3%, indicating the rate at which RHC is growing has slowed down. Why could this be happening? Well, let’s look at what’s transpiring with margins and if the whole industry is facing the same headwind.
Revenue growth in the past few years, has been positive, however, earnings growth has been lagging behind meaning Ramsay Health Care has been growing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the Australian healthcare industry has been relatively flat in terms of earnings growth in the prior year, levelling off from a robust 15.8% over the past five. This growth is a median of profitable companies of 17 Healthcare companies in AU including Healthscope, Pacific Smiles Group and Apiam Animal Health. This means that any recent headwind the industry is experiencing, it’s hitting Ramsay Health Care harder than its peers.
In terms of returns from investment, Ramsay Health Care has invested its equity funds well leading to a 21.1% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 6.4% exceeds the AU Healthcare industry of 6.4%, indicating Ramsay Health Care has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Ramsay Health Care’s debt level, has increased over the past 3 years from 10.5% to 11.5%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. I recommend you continue to research Ramsay Health Care to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for RHC’s future growth? Take a look at our free research report of analyst consensus for RHC’s outlook.
Financial Health: Are RHC’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 31 December 2017. 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.
