MENU

Results: Should you buy Ramsay Health Care shares?

The Ramsay Health Care Limited (ASX: RHC) share price will be on watch on Thursday following the release of the private hospital operator’s half year results.

Here’s a summary of how Ramsay performed in the first half compared to the prior corresponding period:

  • Revenue increase 14.9% to $5.1 billion (6.1% excluding Capio).
  • EBITDA up 9.8% to $728.6 million (7.2% excluding Capio).
  • Core net profit after tax up 1% to $290.8 million (1.8% excluding Capio).
  • Core earnings per share up 1.2% to 140.6 cents.
  • Interim dividend up 4.3% to 60 cents fully franked.
  • Outlook: Reiterated core EPS growth guidance of up to 2%.

What were the drivers of the result?

The Australia/Asia segment was the star performer during the period with Australia revenue growing 4.8% to $2.6 billion. EBITDA grew 5.7% to $484.6 million during the half. This was driven by volume growth and an ongoing focus on achieving operational efficiencies.

Over in the United Kingdom the company saw its revenue rise 1.6% to £209.6 million. Unfortunately, EBITDAR fell 9.2% to £44.8 million. Management advised that “while Q1 was challenging and impacted overall earnings for H1, we saw good recovery in NHS volume growth in Q2.” It is optimistic this improvement will be maintained in the second half.

The Continental Europe segment delivered a 25.7% increase in revenue to €1.3 billion and a 19.1% lift in EBITDAR to €231.3 million. This was driven largely by the acquisition of the Capio business during the half. Excluding the acquisition, segment revenue would have been up 2.5% and EBITDAR would have lifted 5.3%.

Outlook.

Ramsay’s managing director, Craig McNally, appeared cautiously optimistic on the company’s outlook.

He noted that positive signs are emerging in the UK in respect to price and volume growth but warned that Brexit could pose some challenges in the short term.

In Australia Mr McNally admitted that there are short term challenges for the sector, but believes the long term outlook is positive.

Ramsay has reaffirmed its FY 2019 core EPS growth guidance of up to 2%, barring unforeseen circumstances.

Should you invest?

Based on Ramsay’s guidance, I estimate that its shares are changing hands at 22x forward earnings. Given its current growth profile and outlook over the medium term, I think this makes its shares expensive.

In light of this, I would sooner buy healthcare shares such as CSL Limited (ASX: CSL) and ResMed Inc. (ASX: RMD) instead of Ramsay, unless its shares dropped back enough so they were trading at around 17x forward earnings.

Finally, these blue chip shares could be even better options next month as well.

Top 3 ASX Blue Chips To Buy For March

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 2019."

Each one pays a fully franked dividend. 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 move – we may be forced to remove this report.

Click here to claim your free report.

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.

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…

Including:

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!