The Ramsay Health Care Limited (ASX: RHC) share price has risen 10% in 2019, but is it a buy right now?
Ramsay is the largest private hospital operator in Australia, Scandinavia and France. It also has a major presence in the UK. It has been operating for more than 50 years, having been started by Paul Ramsay AO in 1964. It has 480 facilities across 11 countries with 77,000 staff, annually treating around 8.5 million patients.
Is The Ramsay Share Price A Buy?
Up until 2015 Ramsay had been on a very impressive streak, going from $1 at the start of 2000 to $68 in 2015.
The Ramsay Negatives
A number of issues have plagued Ramsay in recent years. The private hospital operator is dependent on patients, private health insurers and the government all being willing to pay for their part of the costs.
Ramsay depends on a good percentage of the population holding private health insurance from providers like Medibank Private Limited (ASX: MPL) and NIB Holdings Limited (ASX: NHF). Private health insurance premiums have been rising quicker than wages, making it harder for households to justify.
The problem is that premiums grow in line with health expenditure, not inflation, which is split across all policyholders. The young subsidising the old is a necessary future, but as more young people leave the system it can become unsustainable.
Ramsay also faces growing competition from not-for-profit private hospital operators and other providers like Healthscope Ltd (ASX: HSO).
Ramsay Positives
But there are positives as well. Ramsay seems to have a very useful tailwind of the ageing population. The number of people aged over 65 is expected to grow by 70% over the next two decades.
Ramsay has a strong track record of re-investing some of its profit into constructing new hospitals and expanding its current portfolio.
The private hospital operator has been diligent in geographically expanding its global network of hospitals through acquisitions, such as the recent Capio deal. Having operations in many countries means it can invest wherever is the best place for the money.
One of the best things for long term shareholders is that Ramsay has increased its dividend every year since 2000.
I don’t think it’s a buy with Ramsay’s current growth predicted to be so sluggish due to the issues I discussed earlier, it’s valued at 22 times financial year 2019’s estimated earnings, according to Commsec.
Ramsay isn’t the only lower-risk ASX share to consider. The stocks in the FREE report below are all proven and reliable long term businesses.
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