The healthcare provider Ramsay Health Care Limited (ASX: RHC) has put on an impressive show of share price growth and investing returns. Over the last year, the stock is up 36% versus the 2.8% gain of the S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO).
Here are some points I think every investor needs to know about the company when considering this successful business as a potential investment.
Market leader in Australia and now in France
Beginning in 1964, the company has grown steadily over the past 50 years to operating 212 hospitals and day surgery facilities. It is the market leader for privately operated hospitals in Australia and with recent overseas acquisitions has now taken the title of leading private hospital operator in France as well.
It is also developing a network of healthcare facilities in Asia. Currently, it is one of the world’s top five private hospital operators with 25,000 beds and places, admitting over 2.5 million patients annually.
Long record of growth
This successful business has more than tripled revenues since 2005, with FY 2014 setting a record at $4.9 billion. Likewise, that year’s $346.2 million underlying net profit was its highest ever.
Over the past five years, the company has increased earnings an average 17% annually, which is remarkable growth for a healthcare service provider. Investors have also benefited greatly from the past five-year total shareholder return of an astounding 40.8% on average annually.
Solid business with good financials
In FY 2014, the company had several acquisitions including the France-based Medipsy network of 30 psychiatric hospitals, as well as entering into a joint venture with a Malaysian health care provider. This helped underlying earnings per share climb 20.6% over the previous year.
Long-term debt is at manageable levels and book value per share has risen alongside steadily growing earnings. Dividends have more than doubled since 2009. Currently, the stock pays a 1.7% yield fully franked.
Revenue should rise in FY 2015 after the company completed the acquisition of a controlling interest in leading French private hospital operator Générale de Santé SA. Ramsay Health Care is also growing its Australian hospital network. One way it maximises business growth potential is by expanding and upgrading existing hospital facilities.
In FY 2013 it authorised $172 million for this “brownfield” expansion. This will pay a good return in the future without paying more for new real estate.
Consensus analyst forecasts are for earnings growth in the high teens over the next two years. The stock is priced at 30x earnings and is hitting new 52-week highs recently.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.
- BHP Billiton Limited or Greencross Limited: Which should you buy? – April 20, 2015 4:27pm
- Buy these 3 stocks for a super retirement – April 20, 2015 12:51pm
- Coca-Cola Amatil Ltd, Flight Centre Travel Group Ltd and Super Retail Group Ltd: On the rise and ready to buy – April 20, 2015 11:34am