For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Orion Health Group Limited (NZSE:OHE) useful as an attempt to give more color around how Orion Health Group is currently performing.
Check out our latest analysis for Orion Health Group
How Did OHE’s Recent Performance Stack Up Against Its Past?
OHE is loss-making, with the most recent trailing twelve-month earnings of -NZ$40.6m (from 31 March 2018), which compared to last year has become more negative. Furthermore, the company’s loss seem to be growing over time, with the five-year earnings average of -NZ$36.5m. Each year, for the past five years OHE has seen an annual increase in operating expense growth, outpacing revenue growth of 8.1%, on average. This adverse movement is a driver of the company’s inability to reach breakeven.
Scanning growth from a sector-level, the NZ healthcare services industry has been growing its average earnings by double-digit 12.6% over the prior twelve months, and 19.4% over the past five. This growth is a median of profitable companies of stocks internationally, operating in the industry. I’ve decided to use a global peer group as there’s not enough companies in that are considered as appropriate peers, and I wanted to get a broader perspective on the regional growth. Some peers include , and . This means that any uplift the industry is benefiting from, Orion Health Group has not been able to realize the gains unlike its industry peers.
Given that Orion Health Group is loss-making, with operating expenses (opex) growing year-on-year at 6.0%, it may need to raise more cash over the next year. It currently has NZ$9.6m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached NZ$31.8m in the latest twelve months. Although this is a relatively simplistic calculation, and Orion Health Group may reduce its costs or raise debt capital instead of coming to equity markets, the outcome of this analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to envisage what will occur going forward, and when. The most useful step is to assess company-specific issues Orion Health Group may be facing and whether management guidance has dependably been met in the past. You should continue to research Orion Health Group to get a more holistic view of the stock by looking at: