Why the Ramsay Health Care share price surged 6% on the ASX yesterday

The Ramsay Health Care Ltd (ASX: RHC) share price surged 5.90% on the ASX yesterday after the company announced strong half-year earnings punctuated by a 14.9% increase in revenue.

It was also a good day for the S&P/ASX200 Index (ASX: XJO) which rose 0.3% to 6,169 points on some strong earnings result and good performance in offshore markets.

What’s the results wrap?

Ramsay increased its revenue by 14.9% on prior corresponding period (pcp) to $5.1 billion with earnings before interest, tax, depreciation and amortisation (EBITDA) rising 9.8% on pcp to $728.6 million. Core net profit after tax (NPAT) was steady at $290.8 million, which saw core earnings per share (EPS) rise 1.2% to 140.6 cents per share (cps).

Investors would be pleased to see the 4.3% increase in the interim dividend to 60 cps (fully-franked) while core EPS growth guidance of up to 2% was reiterated by management in the results.

Ramsay continues to benefit from its traditional income sources, including its Australia/Asia segment which saw EBITDA growth of 5.7% on pcp to $484.6 million in the half. Higher volumes and an ongoing operational efficiency focus were the big drivers here, while the company’s UK segment also saw revenue rise 1.6% to £209.6 million (A$390.8 million).

What happened with Capio?

In December 2018, Ramsay’s French subsidiary (Ramsay Générale de Santé) finally acquired Capio AB for ~A$1.3 billion after a long-winded pursuit of the Swedish healthcare provider. Ramsay has never been shy of acquisitive behaviour and with limited growth opportunities in Australia, there is little reason to believe that this will stop anytime soon.

Is the Ramsay share price a Buy?

I’ve never been super bullish on healthcare in Australia and despite a robust result, I don’t think the Ramsay share price is set to explode in the next 6-12 months. While there are other options within healthcare including CSL Limited (ASX: CSL) in biotech or Estia Health Ltd (ASX: EHE) in the aged care space, I would rather look at these top growth shares that have been tipped as market beaters.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. 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.

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