Measuring Inovalon Holdings Inc’s (NASDAQ:INOV) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess INOV’s recent performance announced on 31 March 2018 and compare these figures to its historical trend and industry movements.
How Did INOV’s Recent Performance Stack Up Against Its Past?INOV’s trailing twelve-month earnings (from 31 March 2018) of US$13.99m has more than halved from US$26.94m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -9.38%, indicating the rate at which INOV is growing has slowed down. Why is this? Well, let’s look at what’s going on with margins and whether the whole industry is facing the same headwind.
Revenue growth in the past couple of years, has been positive, however earnings growth has been falling. This suggest that Inovalon Holdings has been ramping up expenses, which is harming margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the US healthcare services industry has been growing its average earnings by double-digit 24.46% in the past year, and 19.46% over the past half a decade. This growth is a median of profitable companies of 23 Healthcare Services companies in US including Quality Systems, Vigil Health Solutions and DMD Digital Health Connections Group. This shows that any uplift the industry is benefiting from, Inovalon Holdings has not been able to leverage it as much as its average peer.In terms of returns from investment, Inovalon Holdings has not invested its equity funds well, leading to a 2.27% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 1.56% is below the US Healthcare Services industry of 6.70%, indicating Inovalon Holdings’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Inovalon Holdings’s debt level, has declined over the past 3 years from 11.62% to 0.21%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.14% to 38.30% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. In some cases, companies that face a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and growth. You should continue to research Inovalon Holdings to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for INOV’s future growth? Take a look at our free research report of analyst consensus for INOV’s outlook.
- Financial Health: Is INOV’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.