Healthscope Ltd (ASX: HSO) is one of Australia's largest healthcare companies with a market capitalisation of $3.6 billion. It is currently Australia's second biggest operator of private hospitals.
I think it could turn into one of Australia's best businesses for the following reasons:
Defensive sector
Healthcare has been one of the best industries to have been invested in over the last decade.
It's almost impossible to put a price on good health or indeed life in general. That makes most of the Australian population very willing to pay whatever it takes to become healthy and stay healthy.
Not only that, but people don't decide when they're going to become sick or need to visit the hospital. Ill health doesn't really follow economic patterns.
Large growth pipeline
Healthscope is dedicating significant effort and capital to increasing the number of hospital beds it will operate over the next few years.
By the end of FY19 it will have boosted its total number of beds by 792, which represents a sizeable increase of its current total. Its current biggest project is the Sydney Northern Beaches Hospital which will add 450 beds.
The boost to potential revenue and reduction of construction costs combined could materially increase earnings per share and should also allow for a good increase of the dividend as well.
Ageing tailwinds
The Australian population is facing unstoppable ageing demographics. This presents a number of problems and opportunities for investors (and the government).
The biggest users of hospitals are the older members of the population. The amount of people over 65 is expected to grow by around 75% over the next 20 years. This could be a huge boost to Healthscope over the coming years.
Foolish takeaway
Healthscope is currently trading at 18x FY18's estimated earnings with an unfranked dividend yield of 3.57%. I wouldn't be surprised if the dividend started being franked soon too.
I think the current price is a very fair price to pay considering the defensive and growth qualities that Healthscope has.
For more great growth stocks, you should check out our report on the best growth stocks to buy this year.