Medibank Private Ltd (ASX: MPL) shares have been on form over the last six months.
During this time, the private health insurer's shares have risen almost 8%.
This leaves them trading at $3.75, which is just a stone's throw away from their 52-week high of $3.94.
But can this run continue or have Medibank shares now peaked for the time being? Let's take a look at what analysts at Goldman Sachs are saying about the company.
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What is Goldman Sachs saying about Medibank shares?
Well, there's good news and bad news for Medibank shareholders.
The good news is that Goldman doesn't believe you should be rushing out to sell your shares. The bad news is that it does feel that they are now fully valued.
According to a note from late last month, the broker has reaffirmed its neutral rating and $3.70 price target. This is marginally lower than where they currently trade.
But thanks to dividends, Goldman expects a positive but modest total return over the next 12 months.
It is forecasting fully franked dividends of 16 cents per share in FY 2024 and 17 cents per share in FY 2025. This equates to dividend yields of 4.25% and 4.5%, respectively.
Goldman likes Medibank due to its defensive earnings and favourable operating conditions. However, due to its current valuation, it isn't able to recommend its shares as a buy right now.
Instead, it prefers rival NIB Holdings Limited (ASX: NHF). It commented:
MPL is one of the largest private health insurers in Australia. We are Neutral rated on the stock. We like MPL given: 1) it offers defensive exposure to the private health insurance sector which is experiencing favourable operating trends, 2) the claims environment (utilisation / inflation) remains manageable, 3) policyholder give backs are supporting retention, 4) strong recovery in non-resident volumes – international students, workers and visitor arrivals. However, we are Neutral reflecting: 1) MPL's policyholder growth vs NHF, 2) Valuation, 3) Some risk related to cyber security legal cases and investigations.
Goldman Sachs currently has a buy rating and $8.10 price target on NIB's shares. This implies a potential return of 9.5% over the next 12 months before dividends and approximately 13.5% including them. It said:
We currently have a preference for NHF in this space reflecting strong underlying top line growth through policyholder growth and premium rate increases, greater diversity of earnings outside of regulated resident health insurance and valuation appeal.
