Is the Ramsay Health Care Limited share price a buy?

The Ramsay Health Care Limited (ASX: RHC) share price is close to its 52-week low, it’s currently $63.10.

Ramsay is Australia’s largest private hospital operator and also has operations overseas. I believe it’s worth asking if Ramsay is worth a buy at today’s price.

Bull case

Ramsay is highly exposed to the ageing demographic tailwind because its main group of patients are the elderly – sadly the old we get the more likely we’ll need a hospital visit. The number of people over 65 is expected to grow by 75% over the next 20 years, which should mean a lot more patients.

The private hospital operator is investing for further growth by expanding its current hospitals and building new ones. The company also has plans to grow into a new geographical area like North America or China in the next few years.

Ramsay is a very high quality business and has effective management. I think it’s a well-run company and it wants to reward shareholders when it can. Ramsay has increased its dividend every year since 2000.

Bear case

However, the Ramsay share price has dropped for a reason. Firstly, the rising interest rates in the US makes defensive shares like healthcare businesses look less interesting, plus rising interest rates theoretically have negative effects on all asset prices.

The recent Ramsay result was not very inspiring. Both the UK and France segments of Ramsay didn’t perform well in the latest result. The UK revenue fell by 4.8% and the France revenue dropped by 1.1%. It is a worry that Ramsay’s statutory earnings per share (EPS) dropped by 3.6% in the December 2017 half-year result.

There is also a big issue surrounding the affordability of private health insurance, which has a big knock-on effect for companies which rely on the number of policyholders being maintained or hopefully growing. If private health insurance premiums rises slow dramatically or the number of policyholders decrease then Ramsay could be in trouble.

Foolish takeaway

Ramsay is currently trading at 20x FY19’s estimated earnings, which seems like a reasonable price to pay for a high quality business. It also has a grossed-up dividend yield of 3.14%. I can understand why people would think it’s a buy and a sell. In the short-term it may go down further but in the long-term I think it will make a good holding.

Investors looking to benefit from Australia’s ageing population might be better going with one of these top growth stocks.

Top 3 ASX 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 Tristan Harrison 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 Scott Phillips.

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!