The profit margin tells you how much profit a company makes for every $1 it generates in revenue. Profit margins vary by industry, but all else being equal, the higher a company’s profit margin compared to its competitors, the better.
Based on 2008 Financial Reports of the following healthcare stocks, I am going to see how their net profit margin compare with each other.
Ranking based on net profit margin :
1) Thomson Medical Centre – 18.5%
2) Raffles Medical Group – 15.8%
3) Healthway Medical Group – 11.8%
4) Health Management International (HMI) – 10.86%
5) AsiaMedic Ltd – 8.77%
6) Parkway Holdings – 4.25%
7) Medtec International – 1.26%
8) Pacific Healthcare – (17%) Loss
General Comments :
I am quite impressed with Thomson Medical Centre. Not only do they excel in their credit control, their net profit margin also reflect similar excellence. I believe medical healthcare services and related industries are likely to show continued strength whether in a boom or recessionary market.
Most of the healthcare stocks seems to be making some net profit with the exception of Pacific Healthcare. The major expenses I saw on their income statement are mainly from employee benefit expenses ($42,937,000) and other expenses ($25,954,000). The other expenses arise mainly from the impairment loss on goodwill and intangible assets.
The action to write-off the goodwill may be driven by the extraordinary market conditions that have depressed their stock value. This accounting charge shows impacts on Pacific Healthcare’s reported earnings. It is better to look at overall financial analysis of the organisation rather than coming to a conclusion based on net profit alone.