The Ramsay Health Care Limited (ASX: RHC) share price has performed very strongly over the last 12 months, rising by 39.27% from $56.85 to $79.18 (at the time of writing).
In particular it has grown very strongly since mid- September 2019, with Ramsay shares up by 27% since then.
Expansion over the past decade
Ramsay has evolved over the past few decades from a small Australian operation to become Australia's largest private healthcare provider, with operations in 11 countries including United Kingdom, France, Indonesia, Malaysia and Italy. It is significantly larger than the number two operator in Australia, Healthscope Limited.
Ramsay has consistently grown revenues from its existing facilities, as well as growing through acquisitions and new developments. Its considerable size and scale enables it to spread its operating costs and provides it with a competitive advantage in negotiations with health insurers regarding patient fees.
Ramsay's overall debt is relatively high, however it appears to be manageable. The ASX healthcare provider has been able to borrow funds relatively easily for new operations, as hospitals are seen as a relatively safe and stable business with a steady flow of patient admissions.
Solid recent financials
For FY19 Ramsay recorded overall revenue of $11.4 billion, a 24.4% increase on the prior corresponding period, boosted by the acquisition of the Capio business. However, if the acquisition is factored out of these results, Ramsay's revenue grew by only 5.3% on FY18's result.
The company's Capio acquisition occurred in 2018, elevating Ramsay to become the second largest private healthcare provider in Europe, with strong positions in both France and Scandinavia.
Ramsay posted a core net profit after tax of $590.9 million in FY19, which was a 2% increase on the prior corresponding period.
Challenges in the private local healthcare system
The healthcare system is highly regulated and changes to government policy with regards to issues such as the healthcare rebate could potentially impact local profits.
In addition, with healthcare premiums becoming unaffordable for an increasing proportion of Australians, this could see more private healthcare patients move towards the public healthcare system.
However, Ramsay's increasing global diversification should minimise the impact of any such trend.
Foolish takeaway
Ramsay is currently trading at a premium with a price-to-earnings (P/E) ratio of 24.8. However, I don't think that this is unreasonable for a top quality, established healthcare company with strong positions in its core markets and further room for growth over the next decade.
Healthcare also is a fairly defensive share asset class, as patients are likely to seek hospital treatment regardless of the state of the economy.
However, with such a steep rise in its share price over the last 4 months, Ramsay shares are now beginning to look a bit pricey, especially with the ASX index near all-time highs.
I would therefore probably add Ramsay to your watch list and see if the share price becomes a bit more attractive over the next few months if you are considering purchasing shares.
