2 ASX healthcare shares to buy for long-term growth

Here we look at 2 quality ASX healthcare shares to buy for strong long term growth: Ramsay Health Care Limited (ASX: RHC) and ResMed Inc (ASX: RMD).

Phil Harpur

Phil Harpur has been contributing to Motley Fool Australia as a Freelance Writer since late 2019. Phil has spent the last 25 years working as a Senior Technology Analyst for some of the leading global technology research firms. Over the years, his market insights have been quoted in publications such as the AFR, SMH and the Australian, and he has appeared on business TV programs including Bloomberg, CNBC, Fox Business and the ABC. Phil is passionate about the share market and investing. He has post-graduate qualifications in Applied Finance and Investment from the Securities Institute of Australia. In his spare time, Phil likes to chill out listening to his favourite jazz artist or hanging out at the beach.

Published June 16, 2020 4:46 pm AEST

I believe that healthcare is an excellent sector to invest in and the ASX is home to a number of exciting healthcare shares.

The world's population continues to age, which will help drive growing demand for additional healthcare services over the next few decades. Alongside this, the cost of healthcare services continues to rise.

Here we look at 2 ASX healthcare shares that I believe have strong long-term growth potential: Ramsay Health Care Limited (ASX: RHC) and ResMed Inc (ASX: RMD).

Ramsay

Ramsay has evolved significantly over the past few decades. It has transitioned from a small Australian operation to become Australia's largest private healthcare provider, with operations in 11 countries including the United Kingdom, France and Italy. The company is also significantly larger than the number two hospital operator in Australia, Healthscope Limited.

Ramsay's size and scale enable it to spread its operating costs. This also provides it with a competitive advantage in negotiations with health insurers. Although Ramsay's overall debt position is relatively high, in my opinion it appears to be manageable.

This ASX healthcare share has been impacted by the ban on non-essential surgeries. As a result, its share price was hit hard in the early phase of the crisis. However, elective surgeries are now beginning to recommence in Australia with other markets set to follow. Therefore, Ramsay may emerge from its current issues faster than first anticipated.

Also, Ramsay has successfully closed a number of key government deals in Australia and the United Kingdom during the pandemic. These deals will ensure that the company's hospitals do not run at a loss during the current period.

ResMed

ResMed manufactures devices and cloud-based software solutions for the treatment of sleep apnoea and other chronic respiratory illnesses.

ResMed has grown to become one of the world's leading sleep treatment companies and is now a major US-based global company. The company employs more than 7,000 people worldwide.

It provides end-to-end connected health solutions that can be used in the home, reducing the financial and resource burden of in-hospital treatment.

The global potential market for sleep apnea is huge. It is estimated that there are one billion people impacted by sleep apnoea worldwide and more than 80% undiagnosed cased globally.

New product launches and successful targeted acquisitions have all helped drive revenue growth during the past few years. This growth has continued recently, with Ramsay recording a very strong 47% increase in net income during the third quarter of FY 2020.

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