Insights

Ramsay Health Care (ASX:RHC) share price on watch after broker upgrade

The Ramsay Health Care Limited (ASX:RHC) share price could be heading a lot higher from here according to one leading broker…
The post Ramsay Health Care (ASX:RHC) share price on watch after broker upgrade appeared first on The Motley Fool Australia. –

asx brokers

The Ramsay Health Care Limited (ASX: RHC) share price has been an underperformer over the last 12 months.

However, one leading broker believes its shares could soon be heading notably higher from here.

What happened?

This morning analysts at Goldman Sachs upgraded and added the private hospital operator’s shares to its conviction buy list with an improved price target of $70.00.

This implies potential upside of almost 20% over the next 12 months including the 1.4% dividend yield Goldman is forecasting.

Why is Goldman Sachs positive on Ramsay?

According to the note, Ramsay’s shares are currently changing hands at 8.1x earnings before interest, tax, depreciation and amortisation (EBITDA) for an 8% EBITDA compound annual growth rate (CAGR) (FY21-24E). This is towards the bottom of its five-year range.

And while the broker sees various industry challenges over the long term, for now it believes the improvement in near-term fundamentals has not yet been reflected in either consensus forecasts or current trading multiples.

As a result, it expects improvements in both to drive its outperformance through 2021.

In respect to the near-term, the broker commented: “Contrary to many other hospital groups globally, most of RHC’s core market (Australia, 65% of EBIT) has been operating largely unencumbered since July, and entirely without volume limitations since end-November.”

“Reflecting a material backlog, we estimate current surgery volume growth of +7-9%, approximately double long-term rates (+4%), driving an extended period of elevated utilisation and more favorable cost absorption than seen for many years. Furthermore, in recent months, the industry has seen a strong recovery in the margin-accretive ‘medical specialties’, which had lagged conventional surgery volumes in prior recent quarters, likely contributing to further margin relief,” it added.

And while it notes that considerable uncertainty persists in Europe, it points out that much of the downside risk is being limited through government support. Furthermore, the broker expects trading conditions in that market to improve once vaccines are rolled out.

In light of this, the broker sees “scope for improved volume and margin dynamics in FY22-23E” across all markets if PPE costs also taper through this period as it expects.

Overall, it feels this makes the Ramsay share price great value at the current level.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of June 30th

More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Ramsay Health Care (ASX:RHC) share price on watch after broker upgrade appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!