The Ramsay Health Care Limited (ASX: RHC) share price is almost down to its 52-week low price. It's currently sitting at $62.82.
Investors didn't respond well to the Ramsay report, it's down 7.3% since then.
So, was it that bad?
In the report Ramsay revealed that revenue grew by 3%, 'core' earnings before interest and tax (EBIT) grew by 1.5%, 'core' net profit after tax (NPAT) grew by 7.5%, 'core' earnings per share (EPS) grew by 7.8% and statutory EPS declined by 3.6%.
The headline figures aren't incredible, but there's more to it than it seems. Ramsay is a global business, so we have to look at each individual part.
Australian revenue grew by 4.3% and Australian EBIT grew by 9.1%. This is a strong performance compared to fellow private hospital operator Healthscope Ltd's (ASX: HSO) Australian result.
Ramsay's equity accounted share of the Asia joint venture net profits was up 24.1% to $8.5 million.
However, Ramsay's other large international segments didn't do so well.
United Kingdom revenue was down 4.8% and EBITDAR, which is essentially earnings before interest, tax, depreciation and amortisation, was down 4.6%.
France revenue was down 1.1% and EBITDAR was down 5.8%.
The UK and France are key parts of the business, so it was worrying to see that both European operations went backwards in terms of revenue and profit. The company said that it was experiencing pricing constraints and volume pressures.
Ramsay's Managing Director, Craig McNally, said that in the UK a positive tariff adjustment would take affect from 1 April 2018. He said that NHS demand management strategies were currently impacting volumes 'significantly'.
He also said that Ramsay's French operations would undertake a significant centralisation programme for non-core hospital functions such as finance, administration and HR. Once implemented, it will result in good savings each year.
Is it a buy after the result?
Ramsay is one of the highest quality businesses on the ASX. It has excellent tailwinds thanks to the ageing populations in the countries it operates in. It is always investing for growth with smaller projects and it's also looking to expand into another geographical area.
The company's price/earnings ratio has been coming down over the past 18 months as the share price decreases but its core earnings increases.
I believe that Ramsay will be a very good long-term hold at the current price, it's trading at 24x FY17's earnings. I'd be happy to buy today and hold for the next decade. It also helps that it has a grossed-up dividend yield of 3.16%.
