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When WellCare Health Plans, Inc. ( NYSE:WCG ) released its most recent earnings update (31 December 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were WellCare Health Plans’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not WCG actually performed well. Below is a quick commentary on how I see WCG has performed.
Were WCG’s earnings stronger than its past performances and the industry?
WCG’s trailing twelve-month earnings (from 31 December 2018) of US$440m has jumped 18% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 33%, indicating the rate at which WCG is growing has slowed down. To understand what’s happening, let’s examine what’s going on with margins and if the whole industry is experiencing the hit as well.
In terms of returns from investment, WellCare Health Plans has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. Furthermore, its return on assets (ROA) of 4.5% is below the US Healthcare industry of 6.6%, indicating WellCare Health Plans’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for WellCare Health Plans’s debt level, has declined over the past 3 years from 16% to 13%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 40% to 50% over the past 5 years.
What does this mean?
WellCare Health Plans’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research WellCare Health Plans to get a more holistic view of the stock by looking at:
- Future Outlook : What are well-informed industry analysts predicting for WCG’s future growth? Take a look at our free research report of analyst consensus for WCG’s outlook.
- Financial Health : Are WCG’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 December 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 email@example.com .