Medibank Private Ltd (ASX: MPL) has returned to the red-zone today with the stock now trading at its equal lowest price since the beginning of 2015. While the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has managed to regain 0.2% for the day, the health insurer has fallen 1.8% to $2.13 per share.
When Medibank first floated its shares on the ASX in November 2014, investors couldn't get enough of them with the stock soon soaring to a high of $2.59. But since then, the market appears to have recognised the flaws in the company's lofty valuation which could signify a correction even from today's level.
There are a number of factors at play which could lead to further share price pain. To begin with, the company has lost a number of key personnel since November which raises doubts regarding the company's organisation and levels of expertise.
In addition, while Medibank might be the biggest player in Australia's private health insurance field, others such as HCF and BUPA could well be catching up. As health insurance premiums rise, it will be difficult for Medibank to hold onto its share of customers and many will likely switch to lower cost providers, such as those mentioned above.
While some will stay with Medibank, it's possible that many will switch over to Medibank's lower margin business, ahm, which could cannibalise the group's overall earnings.
Medibank Private is a high quality business, but the latest pullback in share price has not yet created a compelling opportunity to buy. While it is certainly worthy of a position on your long-term watchlist, investors would be wise to remain on the sidelines for now and explore other potentially market-beating prospects.
