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Should you buy Medibank Private Ltd at today’s share price?

The Medibank Private Ltd (ASX: MPL) share price has fallen almost 11% in a little over a month.

Since long-running CEO, George Savvides, announced he’d retire from the helm of the Australia’s largest private health insurer 15 months earlier than originally planned, the Medibank share price started going downhill.

Management uncertainty is often a catalyst for investors to sell a stock down. Telstra Corporation Ltd (ASX: TLS) announced the appointment of CEO Andrew Penn earlier this year and it has since fallen 17%.

However, following an above-forecast full-year profit result in August, some leading brokers have wasted no time upgrading their valuations. For example, Deutsche Bank analysts recently upped their price target on Medibank shares (currently $2.28) to $2.60.

According to The Wall Street Journal, 7 of the 15 analysts surveyed currently have a buy rating on the stock, with an average price target of $2.55.

There is a lot to like about owning shares in the company over the next three to five years, including its leading share of a growing domestic healthcare market and its ability to cut costs and move its investable assets into higher returning classes like international shares and property. There’s also a forecast 3.8% fully franked dividend to boot.

Buy, Hold or Sell?

Despite a reasonably bright long-term outlook, Medibank shares have trended back into a more compelling valuation range in recent times. However, I wouldn’t call it a bargain by any means –especially with a price-book ratio over 4.3x. Therefore, I think Medibank shares are a hold, for now.

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Motley Fool contributor Owen Raskiewicz has no position in any stocks mentioned.

Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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