In morning trade the NIB Holdings Limited (ASX: NHF) share price has been one of the worst performers on the market.
At the time of writing the private health insurance provider shares are down almost 10% to $5.47.
With no news out of the company, today’s decline appears to be related to a research note out of Credit Suisse.
According to the note the investment bank’s analysts have downgraded NIB Holdings to an underperform rating with a $5.50 price target, believing that its shares don’t deserve to trade at the premium they have been trading at.
Credit Suisse clearly wasn’t impressed with the quarterly data out of Australian Prudential Regulation Authority (APRA) today.
Although the data shows that profit across the private health insurance sector rose 18.2% to $1.3 billion over the year to April, net margins in the sector have fallen from 5.6% to 4.8% over the period.
Should you buy the dip?
Following today’s decline NIB Holdings’ shares are changing hands at just under 20x trailing earnings.
Although I would prefer to see it drop a little lower still, I believe this is a reasonably fair price to pay to own its shares.
However, my preference in the industry would be Medibank Private Ltd (ASX: MPL).
The Medibank Private share price has also tumbled lower today following APRA’s release, leaving its shares trading at around 18x trailing earnings.
This could make it the better option in the industry right now in my opinion.
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.