In my opinion the best share in the healthcare industry is private hospital operator Ramsay Health Care Limited (ASX: RHC). With outstanding growth prospects, a very strong management team, and a history of creating wealth for shareholders, this is a share I would gladly buy and hold for at least the next decade.
But at 36x full year earnings it has become a little expensive for some investors. It’s also a similar story for another outstanding healthcare share Cochlear Limited (ASX: COH). Its shares are changing hands at 41x full year earnings.
In light of this I’ve picked out three healthcare shares which I feel are great value right now. Here they are:
Ansell Limited (ASX: ANN)
This latex product manufacturer had a difficult FY 2016 due to both the general weakening in the external economic environment and currency volatility. Despite this sales and earnings before interest and tax only fell 4% year on year, whereas the market had been expecting far worse. Pleasingly management expects the company to return to low to mid single digit organic growth in the near term thanks to its growth brands, new product launches, and its strong position in numerous key markets. Furthermore, it is looking into selling its Sexual Health business which would complement its strategy of offloading non-core assets to strengthen its core businesses through value-enhancing acquisitions. At 16x earnings, Ansell could be worth a closer look in my opinion.
Monash IVF Group Ltd (ASX: MVF)
This leading fertility treatment company’s shares are changing hands at just 17x estimated FY 2017 earnings. As well as this they are expected to provide shareholders with a fully franked 4% dividend according to CommSec. I’m a big fan of Monash IVF and was very impressed with its recent full year results. Thanks to a 12.4% jump in IVF treatments the company outpaced the industry average of 8.2% and increased its market share to almost 24%. As you might expect the jump in treatments made a noticeable impact to its bottom line as well. Full year net profit after tax increased 34.6% to $28.8 million. With management confident that demand will continue to increase in FY 2017, Monash IVF could be a great investment today.
Pulse Health Limited (ASX: PHG)
I think private hospital operator Pulse Health is a great alternative to its larger rival Ramsay Health Care. In its recent full year results the company delivered an impressive 38% jump in EBITDA to $9.1 million. This means its shares are currently trading on an EV/EBITDA ratio of around 9x. This is a considerable discount to Ramsay Health Care which is currently trading on an EV/EBITDA ratio of around 15x. Pulse Health’s management has advised that it expects to grow EBITDA between 48% and 70% in FY 2017. I believe if it can deliver on this promise then its shares won’t stay this cheap for long.
Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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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