Analyzing HMS Holdings Corp’s (NASDAQ:HMSY) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess HMSY’s recent performance announced on 30 September 2017 and compare these figures to its long-term trend and industry movements. View our latest analysis for HMS Holdings
Was HMSY’s recent earnings decline indicative of a tough track record?
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 analyze various companies on a more comparable basis, using the latest information. For HMS Holdings, its most recent bottom-line (trailing twelve month) is US$23.48M, which, in comparison to the prior year’s level, has declined by a non-trivial -36.90%. Given that these figures may be somewhat short-term, I’ve calculated an annualized five-year value for HMS Holdings’s earnings, which stands at US$35.17M This doesn’t look much better, as earnings seem to have gradually been falling over time.Why could this be happening? Well, let’s look at what’s occurring with margins and whether the entire industry is feeling the heat. Revenue growth over the past few years, has been positive, yet earnings growth has been deteriorating. This means HMS Holdings has been increasing expenses, which is hurting margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the US healthcare services industry has been growing its average earnings by double-digit 27.36% over the prior year, and 16.50% over the last five years. This means that any tailwind the industry is deriving benefit from, HMS Holdings has not been able to leverage it as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that experience a prolonged period of diminishing earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. I suggest you continue to research HMS Holdings to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for HMSY’s future growth? Take a look at our free research report of analyst consensus for HMSY’s outlook.
- 2. Financial Health: Is HMSY’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.