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Are Ramsay Health Care Limited shares cheap?

Arguably one of the biggest disappointments on the market this year has been the Ramsay Health Care Limited (ASX: RHC) share price.

Despite the market climbing almost 7% higher, the Ramsay share price has gone sideways and remains flat year-to-date.

Are Ramsay’s shares cheap?

While they certainly aren’t as cheap as they were around six weeks ago when they traded in or around the $61 mark, I still think they are great value today.

Especially for investors willing to make a buy and hold investment. Thanks to ageing and growing populations, increased chronic disease burden, and improvements in treatments and diagnostic methods, demand for healthcare services is expected to grow at a strong rate for the next couple of decades.

I believe this puts Ramsay and its global private hospital network in a great position to deliver above-average earnings growth for the foreseeable future.

In my opinion, this strong growth potential and its defensive business more than justify its shares changing hands at approximately 28x trailing earnings. Especially when healthcare sector peer Cochlear Limited (ASX: COH) has a similar growth profile but trades at 46x trailing earnings.

Foolish takeaway

Ultimately, although Ramsay’s shares are not conventionally cheap, I think at 28x earnings they have the potential to provide market-beating returns over the next decade.

For this reason I would put the private hospital operator up there as one of the best buy and hold investment options and suggest investors choose it ahead of rivals Healthscope Ltd (ASX: HSO) and Primary Health Care Limited (ASX: PRY).

As well as Ramsay, I think these growth shares are great buy and hold investment options.

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Motley Fool contributor James Mickleboro has no position in any of the 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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