For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Cerner Corporation’s (NASDAQ:CERN) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.
Did CERN beat its long-term earnings growth trend and its industry?
CERN’s trailing twelve-month earnings (from 29 September 2018) of US$835m has jumped 23% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 16%, indicating the rate at which CERN is growing has accelerated. What’s enabled this growth? Let’s see if it is solely a result of industry tailwinds, or if Cerner has experienced some company-specific growth.
In terms of returns from investment, Cerner has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 12% exceeds the US Healthcare Services industry of 7.5%, indicating Cerner has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Cerner’s debt level, has declined over the past 3 years from 18% to 14%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 5.9% to 8.7% over the past 5 years.
What does this mean?
Cerner’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Cerner has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Cerner to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CERN’s future growth? Take a look at our free research report of analyst consensus for CERN’s outlook.
- Financial Health: Are CERN’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 29 September 2018. 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 email@example.com.