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Goldmans Sachs thinks Medibank shares are a sell

It could be time to sell your Medibank Private Ltd (ASX: MPL) shares if the analysts at Goldman Sachs are on the money. According to a November 19 research note out of the Goldman’s desk Medibank’s 12-month share price target is just $2.68.

Goldman’s is bearish on both Medibank and NIB Holdings Limited (ASX: NHF) on the back of September quarter data out of APRA on the private health insurance industry.

According to Goldman’s the data points to rising claims costs and lower policy take ups. 

Moreover, Goldman’s is worried that claims inflation will outpace the level of premium increases (estimated at <3%) the government will permit in 2020.

This suggests gross margins are set to come under pressure and “seems at odds with current c.20x PEs (price-to-earnings multiples) for MPL/NHF.”

If Goldman’s analysis is on the money Medibank shares cloud slide around 14% in less than 12 months. 

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings 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.