Cotiviti Holdings Inc (NYSE:COTV): Has Recent Earnings Growth Beaten Long-Term Trend?

Measuring Cotiviti Holdings Inc’s (NYSE:COTV) track record of past performance is a useful exercise for investors. It enables 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 COTV’s recent performance announced on 31 March 2018 and weigh these figures against its long-term trend and industry movements. View out our latest analysis for Cotiviti Holdings

Did COTV’s recent earnings growth beat the long-term trend and the industry?

COTV’s trailing twelve-month earnings (from 31 March 2018) of US$165.16m has more than doubled from US$48.85m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 66.26%, indicating the rate at which COTV is growing has accelerated. What’s the driver of this growth? Let’s take a look at whether it is only attributable to industry tailwinds, or if Cotiviti Holdings has experienced some company-specific growth.

In the past couple of years, Cotiviti Holdings expanded its bottom line faster than revenue by effectively controlling its costs. This has caused a margin expansion and profitability over time. Inspecting growth from a sector-level, the US healthcare services industry has been growing its average earnings by double-digit 25.92% in the prior year, and 17.99% over the past five years. This shows that any tailwind the industry is deriving benefit from, Cotiviti Holdings is capable of amplifying this to its advantage.

NYSE:COTV Income Statement June 12th 18
NYSE:COTV Income Statement June 12th 18
In terms of returns from investment, Cotiviti Holdings has not invested its equity funds well, leading to a 14.11% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 9.51% exceeds the US Healthcare Services industry of 9.42%, indicating Cotiviti Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Cotiviti Holdings’s debt level, has increased over the past 3 years from 2.80% to 8.69%.

What does this mean?

Cotiviti Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Cotiviti Holdings has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Cotiviti Holdings to get a more holistic view of the stock by looking at:

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