SHL Telemedicine Ltd. (VTX:SHLTN) Is Going Strong But Fundamentals Appear To Be Mixed : Is …

SHL Telemedicine (VTX:SHLTN) has had a great run on the share market with its stock up by a significant 71% over the last three months. But the …

SHL Telemedicine (VTX:SHLTN) has had a great run on the share market with its stock up by a significant 71% over the last three months. But the company’s key financial indicators appear to be differing across the board and that makes us question whether or not the company’s current share price momentum can be maintained. In this article, we decided to focus on SHL Telemedicine’s ROE.

Return on equity or ROE is a key measure used to assess how efficiently a company’s management is utilizing the company’s capital. Put another way, it reveals the company’s success at turning shareholder investments into profits.

See our latest analysis for SHL Telemedicine

How To Calculate Return On Equity?

The formula for return on equity is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for SHL Telemedicine is:

5.1% = US$1.8m ÷ US$35m (Based on the trailing twelve months to June 2020).

The ‘return’ refers to a company’s earnings over the last year. So, this means that for every CHF1 of its shareholder’s investments, the company generates a profit of CHF0.05.

What Is The Relationship Between ROE And Earnings Growth?

So far, we’ve learned that ROE is a measure of a company’s profitability. We now need to evaluate how much profit the company reinvests or “retains” for future growth which then gives us an idea about the growth potential of the company. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don’t necessarily bear these characteristics.

A Side By Side comparison of SHL Telemedicine’s Earnings Growth And 5.1% ROE

On the face of it, SHL Telemedicine’s ROE is not much to talk about. A quick further study shows that the company’s ROE doesn’t compare favorably to the industry average of 8.9% either. In spite of this, SHL Telemedicine was able to grow its net income considerably, at a rate of 57% in the last five years. We reckon that there could be other factors at play here. For example, it is possible that the company’s management has made some good strategic decisions, or that the company has a low payout ratio.

Next, on comparing with the industry net income growth, we found that SHL Telemedicine’s growth is quite high when compared to the industry average growth of 8.2% in the same period, which is great to see.

past-earnings-growth
SWX:SHLTN Past Earnings Growth November 14th 2020

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). Doing so will help them establish if the stock’s future looks promising or ominous. Is SHL Telemedicine fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is SHL Telemedicine Making Efficient Use Of Its Profits?

SHL Telemedicine’s very high three-year median payout ratio of 162% suggests that the company is paying more to its shareholders than what it is earning. Despite this, the company’s earnings grew significantly as we saw above. Having said that, the high payout ratio is definitely risky and something to keep an eye on. To know the 5 risks we have identified for SHL Telemedicine visit our risks dashboard for free.

Besides, SHL Telemedicine has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders.

Conclusion

On the whole, we feel that the performance shown by SHL Telemedicine can be open to many interpretations. While no doubt its earnings growth is pretty substantial, its ROE and earnings retention is quite poor. So while the company has managed to grow its earnings in spite of this, we are unconvinced if this growth could extend, especially during troubled times. Up till now, we’ve only made a short study of the company’s growth data. You can do your own research on SHL Telemedicine and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

How I’ll invest my next £800 in UK shares

I expect it to provide a growing income for investors (once dividends are reintroduced), as well as to see substantial share price growth over the next …

I’m very confident buying UK shares at this time. Even after the recent stock market recovery, the share prices of many UK companies are still very attractive. Many combine income and great value (meaning there’s a margin of safety in their current share prices). I think this means for investors like myself that there’s a unique chance to pick up shares for the long term, shares that can provide an income and capital growth too.

This share price plummeted at the start of the pandemic

One of the shares I’m most keen to invest my next £800 in is a company whose shares I already own — Lloyds Banking Group (LSE: LLOY). The shares have some momentum now, after falling sharply when the pandemic sent the market spiralling down.

It has taken a while for the shares to recover because banks have been seen as one of the big losers from the crisis. The industry is very tied to the overall health of global economies. Lloyds in particular is linked to the health of the UK economy. Therefore, fears of massive job losses leading to bad debts hit sentiment.

The prospect of a vaccine radically changes investor sentiment. That’s why I think the shares will keep rising in the short term. A boost could also come from regulators allowing banks to pay dividends again. The banks have been applying pressure for them to resume.

Lloyds is a UK share I’ll look to add more of now in the expectation of big rewards to shareholders in the future. I expect it to provide a growing income for investors (once dividends are reintroduced), as well as to see substantial share price growth over the next six to 12 months.

Which UK share will I buy after Lloyds?

As I have some cash in my stocks and shares ISA, I have a watchlist of other shares too. Given that Lloyds is a play on the recovery of the stock market, I’d likely invest another £500 in a less cyclical company. As so many companies have cut their dividends this year, I’m keen to find reliable income-paying shares. This is why I’ll also add more to my holding in National Grid (LSE: NG).

The utility giant operates in both the UK and the US, so despite the US contested elections, most of the time and compared to much of the world, it’s working in very stable markets. Adding to the geopolitical stability is National Grid’s stable regulated earnings, which allow it to have great visibility over its income. As a result, it also can confidently pay its dividend, despite significant debts and its limited ability to raise prices quickly.

The big opportunity I think is around sentiment. National Grid has its unregulated Ventures business, which is tapping into renewable energy. I think this alone could excite investors and send the shares much higher. I’m investing on the basis that it’s undervalued, it pays a high dividend yield and other investors could well get excited by its green potential. All these factors, in my view, have the potential to drive the share price much higher.

The post How I’ll invest my next £800 in UK shares appeared first on The Motley Fool UK.

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Andy Ross owns shares in Lloyds Banking Group and National Grid. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020

Legal & General sets out plan to grow dividends – from next year

The Investment Management arm, LGIM, and origination business, LGC, are seen operating in attractive and profitable markets, with both having a …

Legal & General Group PLC (LON:LGEN) has unveiled a new plan to grow its dividends at “low to mid-single digits” for the next five years but reiterated that its current intention is to keep the final 2020 payout flat on 2019

For the period until 2024, the FTSE 100 life insurer said its “ambition” is to generate a total of £8bn to £9bn of cash and capital and to pay £5.6bn-£5.9bn of this as dividends.

The aim is also to grow earnings per share faster than dividends, with net surplus generation to exceed dividends.

L&G chief executive Nigel Wilson said this would deliver an “attractive combination of income and growth”.

This is expected to come from across the group, with each of L&G’s five businesses having “distinct competitive advantages” and operating in markets that are “large and growing”.

The life and annuity business provides stable cash flows from growing back-books, with the annuity portfolio expected to be fully self-financing in the next three to five years.

The Investment Management arm, LGIM, and origination business, LGC, are seen operating in attractive and profitable markets, with both having a strong commitment to ESG-aligned investing.

The group’s general insurance arm LGI aims to sustain growth in the UK and expand in the US and adjacent markets by “applying technology best practice”.

For the current year, L&G said its ambition remained to generate operating profit broadly in line with 2019’s £2.3bn, with the group’s solvency ratio currently “in the mid-170” in percentage terms, up from 173% in the first half, with the annuity asset portfolio having experienced no bond defaults, with 0.8% of net downgrades.

Three income trusts have cut divis – but are they now a bargain?

The only investment trust to invest globally on the list, the Securities Trust of Scotland has committed to paying a dividend of at least 5.5p per share this …

Investment trusts have been a safer place for income investors to park their cash this year versus funds, but manager changes have led to lower dividends in three high-profile investment trusts.

During a tough year for investors, we look at why these changes were made and whether investors should stick with them despite the lower payout.

Temple Bar

The Temple Bar investment trust, which changed manager this year from Ninety One to RWC, has cut its payout by 25pc to 38.5p for this year.

Chairman Arthur Copple said: “From this base level the board believes that it will be possible to renew dividend growth going forward.”

William Heathcoat Amory of Kepler Intelligence, the investment trust research firm, said the change of management provides a “useful juncture to reset expectations.”

Respected new managers Nick Purves and Ian Lance run several British income funds, including taking over St James’s Place funds formerly managed by Neil Woodford, but this is their first investment trust.

The new pair invest with a “value” approach, buying cheap companies in the hope they will rebound. This week the trust has risen 21pc on the back of the news that American pharmaceutical giant Pfizer has created a vaccine that is 90pc effective.

Shares are down 39pc over the past year and are on a 15pc discount to the value of the trust’s holdings but could represent value.

Recommendation: Speculative Buy

Had You Purchased Evergy in 2015, Here’s The Investment Result

Always an important consideration with a dividend-paying company is: should we reinvest our dividends?Over the past 5 years, Evergy Inc has paid …

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a five year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Evergy Inc (NYSE: EVRG) back in 2015. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

EVRG 5-Year Return Details
Start date:11/11/2015
$10,000


11/11/2015
$16,493


11/10/2020
End date:11/10/2020
Start price/share:$41.52
End price/share:$58.59
Starting shares:240.85
Ending shares:281.57
Dividends reinvested/share:$8.66
Total return:64.97%
Average annual return:10.52%
Starting investment:$10,000.00
Ending investment:$16,493.90

As shown above, the five year investment result worked out quite well, with an annualized rate of return of 10.52%. This would have turned a $10K investment made 5 years ago into $16,493.90 today (as of 11/10/2020). On a total return basis, that’s a result of 64.97% (something to think about: how might EVRG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Always an important consideration with a dividend-paying company is: should we reinvest our dividends?Over the past 5 years, Evergy Inc has paid $8.66/share in dividends. For the above analysis, we assume that the investor reinvests dividends into new shares of stock (for the above calculations, the reinvestment is performed using closing price on ex-div date for that dividend).

Based upon the most recent annualized dividend rate of 2.14/share, we calculate that EVRG has a current yield of approximately 3.65%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.14 against the original $41.52/share purchase price. This works out to a yield on cost of 8.79%.

Another great investment quote to think about:

“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” — Warren Buffett