Motley Fool Australia

3 healthcare shares with big growth potential


The healthcare industry is a very attractive sector to invest in. It has defensive earnings because people place their health above everything else. It has consistent earnings because people get sick or injured all year round.

If you can find a growing healthcare stock then I think that’s a strong combination.

Here are three businesses I think are worth a buy:

Ramsay Health Care Limited (ASX: RHC)

Ramsay is the largest private hospital operator in Australia and one of the largest in the world.

Hospitals are utilised for all different types of illnesses and injuries so I think it’s a great way to get exposure to all types of health issues.

The ageing demographics of Australia should boost Ramsay in the long run as more patients need to visit its hospitals. It has a low dividend payout ratio of 50% which is helping fuel growth organically.

Ramsay is trading at 25x FY18’s estimated earnings with a grossed-up dividend yield of 2.45%.

Paragon Care Ltd. (ASX: PGC)

Paragon is a distributor of lots of different health items such as hospital beds and equipment.

The expected rise in the number of patients means more of Paragon’s products will be used. It’s using an acquisition strategy to acquire more distributors which expands Paragon’s offering to hospitals and aged care locations.

Paragon is trading at 14x FY18’s estimated earnings with a grossed-up dividend yield of 4.54%.

ResMed Inc. (CHESS) (ASX: RMD)

ResMed is one of the world’s largest businesses focusing on diagnosing and assisting with sleep apnea.

The rise of health issues has supposedly caused an increase of sleep apnea and this gives ResMed a good opportunity to make a difference in the world with its products.

ResMed is currently trading at 23x FY18’s estimated earnings with an unfranked dividend yield of 1.3%.

Foolish takeaway

I think all three businesses have promising long-term futures but Ramsay is my clear favourite. It is one of the highest quality businesses on the ASX and it has strong long-term potential to be a market-beater.

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Returns as of 6th October 2020

Motley Fool contributor Tristan Harrison owns shares of Ramsay Health Care Limited. 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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