Primary Health Care Limited (ASX: PRY) has reported a pleasing set of full year results which show a 5.8% gain in revenues to $1.52 billion, an 8.3% rise in net profit after tax to $162.5 million and a 14.3% jump in the full year dividend to 20 cents per share.
Despite the solid set of numbers the market sold the shares down 20 cents, or 4.1%, to $4.62 by midday on Wednesday which may suggest that the good news is already fully reflected in the share price. The stock is now trading just 6% above its 52-week low which was set back in June.
Based on the FY 2014 results, the stock is trading on a price-to-earnings ratio of 14.3 and a fully franked yield of 4.3%. At first glance these metrics look compelling on an absolute basis given the outlook for growth in earnings per share (EPS) of between 5% and 12% in the current financial year. However, arguably the EPS number doesn't adequately provide a complete insight into the discrepancy between the accounting profit which adjusts for depreciation and amortisation and the cash profit which factors in higher capital expenditure requirements.
A better opportunity?
In contrast to the market's lacklustre response to Primary's result, shares in the small diagnostics imaging firm Capitol Health Ltd (ASX: CAJ) have now soared around 13% since the release of a strong set of numbers on Tuesday. While Capitol does compete with the likes of the much larger Primary and Sonic Healthcare Limited (ASX: SHL), so far it has managed to carve out a profitable business model with management expecting further growth in the year ahead.
