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Is the Ramsay Health Care Limited (ASX:RHC) share price in the buy zone?

The Ramsay Health Care Limited (ASX: RHC) share price defied the market decline on Tuesday and closed the day 1.5% higher at $55.64.

This small gain reduced the private hospital operator’s share price decline to 21% in 2018.

Is it time to buy Ramsay Health Care’s shares?

While Ramsay Health Care’s shares certainly look a lot more attractive today than they did at the start of the year, it is still a touch too soon for me to make an investment.

The reason for this is that the company is currently facing difficult trading conditions across the majority of its business.

And although I do believe the recent acquisition of Capio AB will be a positive down the line and opens the door to further bolt-on acquisitions in Scandinavia, management expects it to have a neutral impact on its earnings in FY 2019.

This means that it is still targeting positive core EPS growth of just 2% in FY 2019. So, with its shares changing hands at 22x earnings today, I don’t believe there is a compelling enough risk/reward to justify an investment.

But that’s not to say I would sell its shares if I already own them. Due to the quality of the company and its positive long-term growth potential from ageing populations and increasing demand for healthcare services, I believe Ramsay Health Care could prove to be a market-beater over the next decade.

However, in the near term I see far more value in some of its healthcare peers.

The ones that I would be buying today are biotherapeutics giant CSL Limited (ASX: CSL) and sleep treatment-focused medical device company ResMed Inc. (ASX: RMD).

Like Ramsay, both these shares do trade at a premium to the market average, but I believe their near term growth potential and overall business quality justifies this right now.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited and ResMed Inc. 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.

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