Examining Capitol Health Limited’s (ASX:CAJ) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess CAJ’s latest performance announced on 31 December 2017 and weigh these figures against its longer term trend and industry movements. Check out our latest analysis for Capitol Health

Were CAJ’s earnings stronger than its past performances and the industry?

For the most up-to-date info, I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This allows me to examine different stocks on a similar basis, using the latest information. For Capitol Health, its most recent bottom-line (trailing twelve month) is AU$2.48M, which, relative to the previous year’s level, has increased by an impressive 71.01%. Given that these values may be relatively myopic, I’ve computed an annualized five-year value for Capitol Health’s net income, which stands at AU$3.17M This means while earnings growth from last year was positive, over the past couple of years, Capitol Health’s earnings have been waning on average.

Why could this be happening? Let’s examine what’s transpiring with margins and whether the whole industry is feeling the heat. Revenue growth over the last few years, has been positive, nevertheless earnings growth has been declining. This suggest that Capitol Health has been increasing expenses, which is harming margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the Australian healthcare industry has been relatively flat in terms of earnings growth over the prior year, evening out from a solid 22.15% over the past five years. This means any recent headwind the industry is experiencing, the impact on Capitol Health has been softer relative to its peers.

What does this mean?

Capitol Health’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook.

I recommend you continue to research Capitol Health to get a more holistic view of the stock by looking at:

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

2. Financial Health: Is CAJ’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.