It's been just over two months since Medibank Private Ltd (ASX: MPL) started trading on the ASX and only two weeks before it releases its half-year results. The company listed on 25 November at $2.15 per share (retail shareholders paid only $2) and has traded between $2.20 and $2.40 during that time, briefly touching a high of $2.43 in late 2014.
Time to Review Medibank
The start of the new year has seen many of Australia's sharemarket analysts and brokers re-assess their view of the private health insurance giant. Current price targets from analysts range from an extremely pessimistic $1.80 to a hopeful $3.00.
The Case for Buying
The case for buying Medibank shares remains as it was at listing; the group has significant cost-cutting opportunities as a result of becoming a publically-listed company, while there will also be the opportunity to absorb smaller players over the medium term.
Analysts also point to the strong industry dynamics of reliably high premium growth over the past 10 years and outlook for higher healthcare spending as a result of the aging Australian population.
The Case for Not
Pessimistic investors will look at the company's price to earnings ratio of 25 as difficult to justify seeing as smaller rival NIB Holdings Limited (ASX: NHF) trades on a PE of 21. In addition, analysts consider that meaningful growth will be difficult to achieve after the first 12 months of cost cutting.
Time to Buy?
I will wait for Medibank to come on sale before I buy because I don't believe there's enough growth achievable in Australia to justify the current price. I view Australia's best hospital and medical stocks that have operations overseas as better investments over the long term due to their proven ability to operate across many countries.
