When Traditional Therapy Clinics Limited (ASX:TTC) announced its most recent earnings (30 June 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Traditional Therapy Clinics performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see TTC has performed. View our latest analysis for Traditional Therapy Clinics
Did TTC perform worse than its track record and industry?
For the purpose of this commentary, I like to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This enables me to analyze various companies on a similar basis, using new information. “For Traditional Therapy Clinics, its “, most recent twelve-month earnings is A$17.0M, which compared to the previous year’s figure, has declined by -10.22%. Since these figures are fairly short-term, I’ve determined an annualized five-year value for Traditional Therapy Clinics’s net income, which stands at A$14.4M. This means that even though earnings declined against the prior year, over the longer term, Traditional Therapy Clinics’s profits have been increasing on average.
What’s enabled this growth? Let’s see if it is solely because of an industry uplift, or if Traditional Therapy Clinics has seen some company-specific growth. The climb in earnings seems to be supported by a strong top-line increase outstripping its growth rate of expenses. Though this brought about a margin contraction, it has made Traditional Therapy Clinics more profitable. Viewing growth from a sector-level, the Australian healthcare industry has been growing, albeit, at a subdued single-digit rate of 8.52% over the past year, and a substantial 13.02% over the past five years. This suggests that any uplift the industry is benefiting from, Traditional Therapy Clinics has not been able to leverage it as much as its industry peers.
What does this mean?
Though Traditional Therapy Clinics’s past data is helpful, it is only one aspect of my investment thesis. Companies are profitable, but have unpredictable earnings, can have many factors influencing its business. I recommend you continue to research Traditional Therapy Clinics to get a better picture of the stock by looking at:
1. Financial Health: Is TTC’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.