Medibank (ASX:MPL) share price forecast for more growth: fund manager

The Aussie insurance sector is "experiencing some of the best conditions" in years

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The Medibank Private Ltd (ASX: MPL) share price has handily outperformed the S&P/ASX 200 Index (ASX: XJO) in 2021, despite a strong showing from the index.

Year-to-date, Medibank shares are up 14% compared to a 10.5% gain posted by the ASX 200.

And the integrated healthcare company could have more outperformance to come.

That's according to Andrew Martin, the principal portfolio manager of the Alphinity Australian Share Fund and the Alphinity Concentrated Australian Share Fund.

Earnings upgrades ahead?

One of the catalysts that could see the Medibank share price charge higher in the months ahead is the potential for earnings upgrades.

Speaking to the Motley Fool earlier in October, Martin explained:

We invest in what we call earnings leadership. Those are companies that are performing better than the market expects from an earnings perspective. Companies that are getting consistent earnings upgrades.

Alphinity concentrates on analysing individual stocks bottom up. But when it comes to the potential for earnings upgrades, Martin pointed to the Aussie insurance sector as one to keep an eye on:

One of the few sectors left getting earnings upgrades is insurance. It's traditionally quite a volatile sector, because you can get big hits every now and again. But they're experiencing some of the best conditions they've experienced since the early 2000s. A much better pricing environment coming through is helping grow the top line, and then you get this expansion in margin.

Which brings us to the Medibank share price.

When asked which ASX shares he believes have the potential to outperform, Martin had a few up his sleeve.

Among those, he said, "We quite like Medibank. It's an insurance company, but health insurance, so a different kind of market."

Martin said the business has "really been transforming itself since it listed".

It's taken some really strong leadership in terms of sorting out a number of issues in the market around claims and what was happening in terms of healthcare costs going up materially. They've worked with the industry to try to contain pricing and therefore grow the industry.

How has the Medibank share price been performing?

Medibank shares are up 27% over the past 12 months. By comparison, the ASX 200 has gained 18% over that same time.

Over the past month, the Medibank share price has struggled a bit, down 1% to the current $3.47 per share.

At the current share price, the company pays a trailing dividend yield of 3.6%, fully franked.

You can read the Motley Fool's full interview with Alphinity's Andrew Martin here.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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