Shares in Ramsay Healthcare Limited (ASX: RHC) have jumped 3% higher to trade at $39, close to a 52-week high.
Healthcare shares are on a roll today, with Mesoblast limited (ASX: MSB) shares trading 4% higher at $6.33.
Ramsay is a quality growth company, a fact that hasn't gone un-noticed with the Australian investing public.
Ramsay, which owns and operates private hospitals around the world, recently reported a 5.5% increase in revenues to $4.2 billion and a 15.1% jump in core net profit after tax (NPAT) to $290.9 million.
For a company with a market capitalisation of close to $8 billion, the 62% increase in its share price over the past 12 months is nothing short of sensational.
But, this could be about as good as it gets. Ramsay now trades on a forward P/E of 25 and a forward dividend yield of just 2%.
Given the company's continued growth prospects, and the quality of its earnings, Ramsay deserves to trade at a premium to the market. After all, fellow healthcare high-flier CSL Limited (ASX: CSL) has long traded at a premium valuation, and despite analysts forecasting very modest growth in 2014, that company still trades on a forward P/E of 26. But, as investors in Cochlear Limited (ASX: CPH) will attest, if growth falters for these premium-priced stocks, there isn't much in the way of downside protection for shareholders.
