2 healthcare companies you should know: Ramsay Health Care and Sonic Healthcare

Healthcare companies can be solid foundations for investor portfolios since their services are essential to public health. With many people having private health insurance, more of them will take advantage of the services and keep these companies growing. Earnings and growth are stable from their extensive presence in many regions and cities.

Private hospital operator Ramsay Health Care (ASX: RHC) plays a vital service to the communities in which it operates, but as an ASX-listed company, it’s an attractive stock as well. Its had solid earning power over the past 10 years and even during the GFC, rather than suffering a bear market drop like many companies did in 2008-2009, it stayed relatively flat around $8.50 – $10 a share, until it started its ascent again in late 2009.

Roughly four years on, the share price has quadrupled to $40.92. It keeps on growing business as well, as evidenced by the acquisition of the French psychiatric hospital group Medipsy announced early this month. That hospital group operates 30 hospitals with more than 2,600 beds. Ramsay will now be the third-largest hospital operator in France by number of facilities. This adds to its hospitals in Australia, Indonesia and the UK.

Over the past 10 years, the total shareholder return for Ramsay was 27.4%, and over the past five years it improved to 35.2%. For long-term investors, it shows the durable competitive advantage needed to make a good portfolio pick. It leads in market share for the health service industry, followed by privately owned Healthscope.

Sonic Healthcare (ASX: SHL) provides diagnostic medical services in Australia, New Zealand, the US and Europe. It also has an impressive history of earnings growth over the past 10 years, with a 23.9% compound annual growth rate of its NPAT before abnormals over that time.

In the US it is the number three pathology services provider and is the largest business segment of the company after Australia. In Europe it recently acquired a German laboratory business called Labco S.A. that operates five labs and according to Sonic Healthcare will be immediately earnings per share accretive.

Its share price is $15.76 with a PE ratio of 18.7, and over the past year is up 18.9%.

Foolish takeaway

Investors interested in finding more healthcare companies can also research Primary Health Care (ASX: PRY) and EBOS Group (ASX: EBO). Due to the specialised nature of their business, healthcare companies have a constant stream of customers who need their services. Also, competition is low because of the relationships between hospitals, diagnostic service providers and medical products suppliers.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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