Is Ramsay Health Care Limited a buy at this share price? 


The share price of Ramsay Health Care Limited (ASX: RHC) is currently a little over 10% below its 52 week high. Warnings of slowing hospital admissions growth from Healthscope Ltd (ASX: HSO) in October of last year and the retirement of CEO Chris Rex had seen the Ramsay Health Care share price soften from highs in August 2016 of over $80, to currently trade under $70.  

Ramsay Health Care is a healthcare service provider and operates primarily through the operation of over 220 hospitals in Australia, France, the United Kingdom, Indonesia and Malaysia.

Its healthcare services include day surgeries, rehabilitation services, maternity services, and psychiatric services. In Australia, Ramsay operates 70 hospitals and admits almost 1 million patients each year. 

The appointment of Craig McNally, an experienced executive from within the company, as the new CEO has made for a reasonably smooth transition.

Long term forecasts for growth in the ageing population also provide a tailwind for the industry. Further, Ramsay has continued to grow strongly. A return on equity of over 20% last year, with forecasts for those returns to be maintained, mean that Ramsay is in a good position to compound its growth. Cash flow is strong, however, debt to equity is high. 

Ramsay is currently trading at a price to earnings ratio of around 26, which is higher than the market at around 17, and the sector at around 20.

However, given the debt that is being carried, using an enterprise multiple to ascertain value may be worthwhile. Enterprise value is simply market capitalisation minus debt plus cash or equivalents.

Ramsay has an enterprise value of around $16.7 billion dollars. And with EBITDA of approximately $1.25 billion, Ramsay has an enterprise multiple of just over 13.

This most likely represents fair value for a strong company, but doesn’t compel me to buy at the current price. I am inclined to wait, but perhaps even a small drop in price might change my mind.   

3 More Ramsay-style Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Stewart Vella owns shares of Ramsay Health Care Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!