Why I think Ramsay Health Care Limited is a must buy today

Ramsay Health Care Limited (ASX:RHC) has been one of the best shares you could have owned over the last 10 years. Could it be the same story over the next 10 years?

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One of my favourite shares on the ASX would have to be private hospital operator Ramsay Health Care Limited (ASX: RHC).

In the last 10 years Ramsay has easily been one of the best shares that investors could have had in their portfolio.

Thanks partly to its strong management team and international expansion, Ramsay has provided shareholders with a stunning average annual total return of 22.5% since 2007.

This level of return means that a $25,000 investment in 2007 would be worth over $190,000 today.

Whilst a return of that magnitude may be wishful thinking over the next decade, I do believe Ramsay is positioned perfectly to provide shareholders with market-beating returns for the foreseeable future.

Ageing populations will be one key driver of growth. According to a recent company presentation the global population aged 60 and above is forecast to more than triple by 2050.

Furthermore, management expects global demand for healthcare to remain strong due to increased chronic disease burden, population growth, and improvements in treatments and diagnostic methods.

In addition to these tailwinds, I suspect Ramsay will continue to expand its hospital network. Currently, that consists of 223 hospitals spread across six countries.

Although it pulled out of a joint venture in China last year, I don't believe it will be long before we see Ramsay operating there again, especially as management have already highlighted the diabetic epidemic as potential opportunity.

Another source of growth could come from its plan to take on the likes of Australian Pharmaceutical Industries Ltd (ASX: API) and Sigma Pharmaceutical Limited (ASX: SIP) by launching community-based pharmacies.

Management aims for these pharmacies to extend the care for patients beyond the hospital walls and I expect the move will be a big success.

All in all, I believe at 26x estimated FY 2017 earnings Ramsay is great value for buy and hold investors. It may come at a premium to rival Healthscope Ltd (ASX: HSO), but I believe its future growth potential warrants this.

Motley Fool contributor James Mickleboro 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.

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