Although the Ramsay Health Care Limited (ASX: RHC) share price finished the day slightly higher on Thursday, at one stage the private hospital operator's shares tumbled to a multi-year low of $53.01.
At that point Ramsay Health Care's shares were down a remarkable 30% since peaking at $76.18 in August of last year.
Is Ramsay Health Care cheap enough to buy now?
While Ramsay Health Care's shares are becoming a lot more attractive now after this sizeable decline, I wouldn't be a buyer just yet.
After all, as I mentioned at the start of the week, Goldman Sachs initiated coverage on the private hospital operator with a sell rating and $49.00 price target. Which could mean it still has further to fall.
This bearish call was made on the belief that Ramsay Health Care's shares are overvalued and that it faces challenging industry dynamics from rising healthcare costs and the decline in private health insurance (PHI) participation.
So although its shares hit a multi-year low today, they would have to fall a lot further before I would be willing to invest.
What is a good buy price?
I would be interested in picking up shares in Ramsay Health Care if they fell to $45.00 or below. At this level I think they provide a decent risk/reward, especially for a long-term investment.
Based on Goldman's forecast for earnings per share of $2.86 in FY 2019, Ramsay Health Care's shares would be trading on a forward price to earnings ratio of just under 16x if they came down to the $45.00 mark. I think this earnings multiple is more befitting for its current growth profile.
But until that happens, I plan to stay away from the company's shares and focus on other healthcare options such as CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH).
