MENU

Why the Healthscope Ltd share price is still an opportunity

The Healthscope Ltd (ASX: HSO) share price has been a disappointment over the past year, with the final straw being the release of its FY17 results, which sent the share price down to $1.62.

However, since then the price has actually risen by 16% to $1.88. I thought the market had been too harsh on Healthscope and I almost bought shares, sadly I didn’t.

I think the share price could still give investors solid returns over the next few years for the following reasons:

Construction and expansion projects are on track

What initially intrigued me about Healthscope was its projected increase of hospital beds and operating theatres.

The biggest project is the Northern Beaches Hospital which should add 450 beds. In total management expect to add 566 beds and 38 operating theatres by FY19.

Private health insurance

A lot of players in the industry, including the government, are recognising how important it is to uphold the strength of the private health system.

With the government announcing that more will be done to help lower premiums, particularly for younger people, this should result in Healthscope’s patient base feeling less under pressure due to costs.

Franking credits

Historically, dividends make up around half of the share market’s returns and this (normally) doesn’t include the franking credits effect. Franking credits make up 30% of a grossed-up dividend yield.

At the moment, Healthscope doesn’t attach franking credits but it may do soon because it’s generating a taxable profit each year and is therefore creating franking credits.

Franking credits could turn Healthscope’s 3.73% unfranked yield into a grossed-up yield of 5.33%, adding to the returns of an investor.

Foolish takeaway

Healthscope is currently trading at 19x FY18’s estimated earnings. Healthscope isn’t going to smash the lights out but I believe it will be a solid long-term performer from this price.

Other long-term performers could be these dividend shares which could provide the growth and income suited for any investor.

Rich listers know the power of dividend shares!

In FY 2018 share market investors are staring down the barrel of ballooning global debt and potential geopolitical powder keg. But thankfully one Foolish expert is revealing 5 of his favorite dividend payers for wealth-creating income whatever the global weather...

But you must act now. This updated report is available for a limited time only, and your copy is 100% free. So don't miss out!

Simply click here to receive your free copy of "Our Top 5 ASX Dividend Shares to Earn You Money in 2018" right now.

Motley Fool contributor Tristan Harrison owns shares of HEALTHSCPE DEF SET. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.