Is the Ramsay Health Care Limited (ASX: RHC) share price a buy right now when it's valued at around $80?
The large private hospital operator has seen its share price rise around 35% over the past year with a strengthening of the entire ASX share market, though Ramsay has outperformed the ASX.
Is Ramsay a buy today?
Ramsay has been one of the most effective non-tech businesses to grow over the past two decades. It has been steadily investing in building and expanding hospitals, whilst also using acquisitions to grow into countries that it wasn't operating in before.
For example the recent European Capio acquisition has significantly diversified Ramsay's underlying earnings away from Australia with a large presence in Scandinavia and other areas of Europe.
There has been a lot of commentary in recent times about the increasing unaffordability of private health insurance in Australia because the premiums are rising faster than wages. It's particularly hard for younger Australians to justify spending such a large amount of their wages on private health insurance, but it's the younger policyholders that subsidise the older ones.
We'll soon see how Ramsay has done in the six months to 31 December 2019 in reporting season. However, excluding the new accounting standard changes, Ramsay is hoping for core earnings per share (EPS) growth of 2% to 4%, which isn't terrible with the low economic growth in Australia and Europe.
Foolish takeaway
Ramsay is trading at 25x FY21's estimated earnings. This isn't ridiculously expensive, but it's not cheap considering how low the growth rate is and it doesn't have the most defensive earnings in the world. I think there are shares priced better out there when their projected growth is factored in.
