Does CorVel Corporation’s (NASDAQ:CRVL) 26% Earnings Growth Reflect The Long-Term Trend?

After looking at CorVel Corporation’s (NASDAQ:CRVL) latest earnings update (31 December 2018), 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 CorVel

How CRVL fared against its long-term earnings performance and its industry

CRVL’s trailing twelve-month earnings (from 31 December 2018) of US$44m has jumped 26% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 4.7%, indicating the rate at which CRVL is growing has accelerated. What’s the driver of this growth? Let’s take a look at if it is solely attributable to industry tailwinds, or if CorVel has experienced some company-specific growth.

NasdaqGS:CRVL Income Statement, March 21st 2019
NasdaqGS:CRVL Income Statement, March 21st 2019

In terms of returns from investment, CorVel has invested its equity funds well leading to a 23% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 14% exceeds the US Healthcare industry of 7.0%, indicating CorVel has used its assets more efficiently. However, its return on capital (ROC), which also accounts for CorVel’s debt level, has declined over the past 3 years from 31% to 29%.

What does this mean?

Though CorVel’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research CorVel to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for CRVL’s future growth? Take a look at our free research report of analyst consensus for CRVL’s outlook.
  2. Financial Health: Are CRVL’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 2018. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.