Should Australian Pharmaceutical Industries Limited’s (ASX:API) Recent Earnings Decline Worry You?
Assessing Australian Pharmaceutical Industries Limited’s (ASX:API) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Australian Pharmaceutical Industries is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its healthcare industry peers.
Check out our latest analysis for Australian Pharmaceutical Industries
Was API’s weak performance lately a part of a long-term decline?
API’s trailing twelve-month earnings (from 31 August 2018) of AU$48m has declined by -8.2% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 45%, indicating the rate at which API is growing has slowed down. Why could this be happening? Let’s examine what’s going on with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, Australian Pharmaceutical Industries has fallen short of achieving a 20% return on equity (ROE), recording 9.7% instead. Furthermore, its return on assets (ROA) of 3.1% is below the AU Healthcare industry of 4.7%, indicating Australian Pharmaceutical Industries’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Australian Pharmaceutical Industries’s debt level, has declined over the past 3 years from 13% to 11%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I recommend you continue to research Australian Pharmaceutical Industries to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for API’s future growth? Take a look at our free research report of analyst consensus for API’s outlook.
Financial Health: Are API’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 31 August 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 editorial-team@simplywallst.com.
