The Ramsay Health Care Ltd (ASX: RHC) share price is up around 26% over the course of 2019 to $73.26 and is a popular business due to its long-term track record of profit growth and tailwinds of an ageing population linked to ever-growing spending on healthcare into the future.
However, it seems the powerful analysts at Goldman Sachs are going again the crowd's enthusiasm on the private hospital operator with significant operations in the UK, France and Australia.
According to a June 10 note out of the investment bank's research desk Ramsay shares are worth just $57, which means it's set to fall around 20% if Goldman's is on the money.
The analysts warn: "Valuation premium increasingly stretched. On a Sum of the Parts, RHC's Australian hospitals trade at 11.3x NTM EBITDA, a +37% premium vs. developed market peers. Whilst some premium is justified on the basis of positioning and scale, we believe the extent of industry pressure relative to other markets warrants a greater degree of caution. We expect margin pressures to play out over the mid-term."
The analysts also flag rising cost pressures in terms of nurses wages for example, with it expecting lower local private health insurance premium rises than the market, which makes it hard for Ramsay to maintain its all important profit margins.
Goldman's comes to its $57 valuation using a NTM EV/EBITDA multiple of 8.8x, which it has reduced from a higher multiple of 9.1x used previously.
Ramsay shares then could be volatile in the 12 months ahead.
