The Ramsay Health Care Limited (ASX: RHC) share price was a relatively poor performer on Tuesday.
The private hospital operator's shares edged 0.25% lower to $66.93 following the release of a presentation.
This compares to a 0.55% gain by the S&P/ASX 200 Index (ASX: XJO).
Is the Ramsay share price in the buy zone?
According to a note out of Goldman Sachs, it believes the Ramsay share price is in the buy zone.
This morning the broker retained its conviction buy rating and $75.00 price target on the company's shares.
This price target implies potential upside of 12% over the next 12 months.
What did Goldman say?
Goldman notes that Ramsay has provided an update which revealed that Australian organic revenue grew 8.2% during the third quarter. This compares to historic levels of 3% to 5%.
However, one slight negative was that volumes are still being skewed towards surgical and day-patient caseloads, putting near-term pressure on its sales mix.
Positively, though, Goldman believes there are positive signs around the recovery in non-surgical volumes. Furthermore, COVID costs are now tracking -50% below the first half average, which it estimates releases upwards of 7% to 8% of APAC EBIT on an annualised run-rate.
Overall, Goldman Sachs is positive on its outlook and continues to expect Ramsay to outperform the market's current expectations in FY 2021 and FY 2022.
It commented: "Following an encouraging start to CY21, we expect to see positive trends continuing into FY22: 1) elevated utilisation profile: 2) improving cost absorption; 3) tapering of cash 'covid costs'; 4) improving sales mix (non-surgical); and 5) improving surgical mix (higher-acuity)."
"Overall, we make no changes to our sales/EBITDA/EPS forecasts and remain +2% and +9% above Bloomberg consensus in FY21 and FY22 respectively, as we factor in the recovery of margin-accretive caseload, delivery of a backlog, and a tapering of PPE/Covid costs. Our 12-month target price remains A$75, based on our target NTM EV/EBITDA multiple of 10.2x, methodology unchanged, and reiterate Buy (on CL)," it concluded.
The Ramsay share price is up approximately 7% since the start of the year.
