FONAR Corp. :FONR-US: Earnings Analysis: 2016 By the Numbers : September 23, 2016

FONAR Corp. reports financial results for the year ended June 30, 2016.

We analyze the earnings along side the following peers of FONAR Corp. – iCAD, Inc., Hologic, Inc., Digirad Corporation, Medtronic Plc, Royal Philips NV Sponsored ADR, DaVita Inc., American Shared Hospital Services and Navidea Biopharmaceuticals, Inc. (ICAD-US, HOLX-US, DRAD-US, MDT-US, PHG-US, DVA-US, AMS-US and NAVB-US) that have also reported for this period.


  • Gross margins widened from 44.38% to 47.02% compared to the same period last year, operating (EBITDA) margins now 19.57% from 23.81%.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2012 2013 2014 2015 2016
Relevant Numbers (Annual)
Revenues 39.44 49.14 68.51 69.05 73.37
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 5.78 8.68 10.4 12.91 15.72
Earnings Growth (YOY) 82.75 50.24 19.79 24.19 21.8
Net Margin 14.64 17.66 15.18 18.7 21.43
EPS 0.87 0.37 1.52 1.63 2.38
Return on Equity 64.09 33.68 23.61 25.39 26.81
Return on Assets 17.67 16.24 13.86 16.84 19.48

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Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 44.38% to 47.02%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

Gross Margin Versus EBITDA Margin

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

FONR-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 123.81, compared to last year’s level of 122.77 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 18.68% to 19.57% and (2) one-time items. The company’s pretax margins are now 19.77% compared to 18.56% for the same period last year.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

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Company Profile

FONAR Corp. develops and manufactures of MRI scanners. It is engaged in the business of designing, manufacturing, selling and servicing magnetic resonance imaging scanners. The company operates through two segments: Medical Equipment and Physician Management & Diagnostic Services. The Medical Equipment segment manufactures and sells magnetic resonance imaging scanners, which utilize MRI technology for the detection and diagnosis of human disease, abnormalities, other medical conditions and injuries. The Physician Management & Diagnostic Services segment is conducted through Health Management Corp. of America, which is a wholly-owned subsidiary. It provides management, administrative, billing and collection services, office space, equipment, repair, maintenance service and clerical and other non-medical personnel to medical providers. Fonar was founded by Raymond V. Damadian on July 17, 1978 and is headquartered in Melville, NY.

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