In the last five years, Ramsay Health Care Limited (ASX: RHC) has risen by 321%, which is 14.6 times better than the return offered by the ASX during the same time period. It even beats healthcare sector peers such as CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH), which are up by 254% and 80% respectively.

In my view, further gains are very much on the cards for Ramsay for the following three reasons.

Foreign expansion

Ramsay is already a truly global private hospital operator, with 39% of its business being in France and 9% being in the UK. However, I believe that there is expansion potential in other areas; notably emerging markets. Although its foray into China did not go to plan, with Ramsay abruptly ending the joint venture it had with Jinxin, I fully expect it to focus on China and the rest of the emerging world when it comes to growth.

In fact, Ramsay now has three hospitals in Indonesia and three in Malaysia, which gives it a foothold in the potentially lucrative Asian healthcare market. It is estimated by Deloitte that per capita spending on healthcare will increase in Asia at an annual average of 6.6% from 2015-19.

China’s growth rate in per capita healthcare spending during this period is due to be 8.8% per annum, while India’s is even higher at 16.1% per year. To put that in perspective, Australia’s per capita healthcare spending is due to be around 4% per annum during the period.

Brownfield expansion

Of course, there is still opportunity for Ramsay within Australia. Ramsay’s strong cash flow, which included 100% cash conversion in financial year 2015, means that it can invest heavily in brownfield site development. For example, Ramsay approved $197 million for new brownfields capacity expansion during the last financial year and this should see the company deliver 33 projects with 1,041 beds and 41 theatres in 2015 and 2016 combined.

Clearly, there is more scope for expansion due to an ageing population in Australia. And with Ramsay having net operating cash flow of $746 million in the 2015 financial year, investment capability for growth in Australia remains high in my view.

M&A prospects

Ramsay has a history of M&A activity and I believe that there is further scope to do this – especially in Europe. For example, Ramsay is now the largest private hospital operator in France and with it being a fragmented market, there is scope for acquisitions of varying sizes. Similarly, with Ramsay having a commanding position in the UK private hospital sector and sterling weakening by around 10% since the EU referendum last month, the potential for acquisitions there is high.

Although Ramsay’s balance sheet already has total debt of $3.15 billion, I believe there is scope for further borrowing. That’s because Ramsay has a diversified business model which means that further acquisitions could lift its share price over the medium term.

3 Rotten Shares to Sell, and 1 to Buy Today

After a double-digit rally for the ASX since 2016 lows, investors should be on high alert. You'll find a full rundown below of 3 shares we think you should avoid today plus one top pick worth buying, even if the market turns south and the RBA keeps rates at an "emergency low." Simply click here to uncover these stocks.

HOT OFF THE PRESSES: Motley Fool’s #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.

Motley Fool contributor Robert Stephens has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.