The Ramsay Health Care Limited (ASX: RHC) share price has risen by 197% over the last five years and I think it could keep beating the market over the next five years.
Ramsay is the biggest private hospital operator in Australia and one of the largest in the world.
Here are three reasons why you should consider it for your portfolio:
Strong industry
Ramsay is one of the best businesses in the healthcare sector in my opinion.
Healthcare has very defensive earnings because people are willing to spend what it takes to remain alive and healthy. In-fact, I'd say health is the thing people would be most likely to pay for if money was tight.
The other appealing thing about the healthcare industry is that demand is very consistent year to year. People don't choose to get sick and illnesses don't follow economic cycles, Ramsay should always have demand for its services.
Hospitals in-particular are a great way to get exposure to the healthcare industry because they receive patients with all sorts of illnesses, as well as other medical needs such as births.
Ageing population
Ramsay could strongly benefit in the years ahead thanks to Australia's ageing population.
The over-65 age bracket is the one most likely to need to visit a hospital and this cohort is expected to grow by 40% over the next decade. This growth is a slow burner but should help earnings continue to grow.
International ambitions
Ramsay has been one of the most successful ASX businesses at expanding overseas. It has acquired hospitals in the UK and France, making its footprint truly global.
Management recently tried to expand into China, but this wasn't successful. However, it's likely that Ramsay is looking for ways to expand into other countries and this could fuel even more growth in the future.
Ramsay has a very sustainable dividend payout ratio of 50%, so this really helps fuel growth organically.
Risks
The key risk to Ramsay is revenue pressure. The government, patients and private health insurers would all like to keep a lid on Ramsay's revenue. As long as Ramsay can sustainably keep increasing its revenue then it should remain a winner.
Foolish takeaway
Ramsay is currently trading at 25x FY18's estimated earnings with a grossed-up dividend yield of 2.42%.
I'd prefer to buy Ramsay shares in the $60s but I think this price should still be a very good entry point for a long-term investment.
