Should you buy Primary Health Care Limited?

With sentiment being weak, is Primary Health Care Limited (ASX:PRY) really worth buying?

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It’s been a disappointing year for investors in Primary Health Care Limited (ASX: PRY), with the day surgery, eye clinic and pathology laboratory provider seeing its share price fall by 9% since the turn of the year. This is significantly behind the 5% gains made by the ASX over the same time period. However, with recent full year results showing a rise of 7.7% in EPS, could now prove to be the right time to buy a slice of the company?

Super value

The first thing that stands out when analysing Primary Health Care is its valuation. Indeed, it currently trades on a P/E of just 13.7, which is considerably lower than the ASX’s P/E of 16.2. Furthermore, Primary Health Care’s price to book ratio provides more evidence of just how cheap it has become, with shares in the company currently trading on a ratio of just 0.8. This means that investors can essentially purchase every $1 of the company’s net assets for just $0.80, which highlights their bargain status.

Growth potential

Certainly, you could understand why shares in the company are so cheap if they had dire prospects. For instance, if the company was experiencing a decline in earnings that was set to continue. However, Primary Health Care is the complete opposite. As mentioned, EPS increased by 7.7% in its recently reported full year results, while the company’s bottom line is due to increase at a rate of 9% per annum over the next two years. Combining this growth rate with a low valuation equates to a price to earnings growth (PEG) ratio of just 1.5. Growth at a reasonable price, indeed.

A top notch yield

As well as great value and impressive growth prospects, Primary Health Care also has superb income potential. That’s because it currently yields a fat, fully franked yield of 4.6% and, furthermore, dividends per share are all set to increase by 7.4% per annum during the next two years. This means that, should the share price stay where it is, Primary Health Care could be yielding as much as 5.2% in 2015/16. In addition, its dividends are well-covered at 1.6 times.

So, Primary Health Care appears to offer a potent mix of great value, strong growth prospects and highly attractive income potential. As a result, it could prove to be a great long-term investment, with the present time being an ideal moment to buy due to market sentiment being at a low ebb.

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Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.

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