After looking at The Ensign Group Inc’s (NASDAQ:ENSG) latest earnings announcement (31 December 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. 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 Ensign Group’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for Ensign Group

How Did ENSG’s Recent Performance Stack Up Against Its Past?

For the purpose of this commentary, I like to 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 enables me to assess different stocks on a more comparable basis, using the latest information. For Ensign Group, its latest earnings (trailing twelve month) is US$40.48M, which, relative to the previous year’s figure, has dropped by -19.03%. Given that these figures may be fairly nearsighted, I have computed an annualized five-year figure for Ensign Group’s net income, which stands at US$42.05M This doesn’t seem to paint a better picture, since earnings seem to have gradually been falling over time.

Why is this? Well, let’s look at what’s transpiring with margins and whether the entire industry is facing the same headwind. Revenue growth over the last couple of years, has been positive, however, earnings growth has fallen behind meaning Ensign Group 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 US healthcare industry has been growing its average earnings by double-digit 10.81% in the past year, and a more subdued 9.94% over the past half a decade. This means whatever uplift the industry is enjoying, Ensign Group has not been able to gain as much as its average peer.

What does this mean?

Ensign Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Generally companies that face a drawn out period of decline in earnings are going through some sort of reinvestment phase in order to keep up with the recent industry expansion and disruption. I suggest you continue to research Ensign Group to get a better picture of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for ENSG’s future growth? Take a look at our free research report of analyst consensus for ENSG’s outlook.

• 2. Financial Health: Is ENSG’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 trailing twelve months from 31 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.