The market's hunger for a slice of Medibank Private Ltd (ASX: MPL) appear to have eased since the health insurance giant released its interim results last week. Prior to the report's release, the stock surged to a fresh all-time high of $2.59 but fell as low as $2.37 a short time after the announcement was made.
Although the health insurer managed to cut costs, improve efficiencies and confirm its guidance for full-year earnings, investors had been hoping for an even better set of results. Indeed, numerous analysts have questioned the viability of Medibank Private as a long-term investment prospect.
While some are concerned about the company's ability to improve its competitive standpoint (for instance, reducing costs and improving its margins), others wonder whether the health insurer will be able to continue growing once those efficiency improvements have been made.
Medibank Private's shares have managed to recover some of their losses and are now sitting at $2.46. While some investors will no doubt see this as an opportunity to 'buy in the dip', it's important to remember that there is still an enormous level of hype built into the stock.
Assuming that the company does hit its earnings guidance of $258.2 million, the shares are still trading on a forward price-earnings ratio (P/E) of 26.2x earnings. That's substantially higher than rival NIB Holdings Limited (ASX: NHF), which trades on a forecast P/E ratio of 21.4 times earnings and arguably boasts greater growth potential.
Until such time that Medibank Private's shares retreat to a more attractive price, investors would be wise to add the stock to their watchlist and focus on some more compelling opportunities.
