According to a recent presentation by private hospital operator Ramsay Health Care Limited (ASX: RHC), by 2050 the global population aged 60 or above is expected to more than triple in size.
As populations across the world age, demand for healthcare services is expected to grow at a solid rate for at least the next couple of decades.
As a result, I believe this makes the sector a great place to start when looking for long-term buy and hold investments.
Here are three reasons I think Ramsay is a long-term buy:
Strong returns on capital.
Due to its global footprint I believe the company is arguably the best positioned Australian healthcare share to profit from this tailwind. Especially given its track record of generating strong returns on capital from its hospitals. Due to its scale, Ramsay has been able to achieve this thanks partly to being a cost leader with a high level of pricing power.
Good value.
Although at almost 30x annualised earnings Ramsay's shares are on the expensive side, I believe that it does justify the premium. After all, in the last 10 years the company has grown its earnings by an average of 16.8% per annum. This level of growth, which I expect to continue for the foreseeable future, vastly outperforms that of its peers Sonic Healthcare Limited (ASX: SHL) and Primary Health Care Limited (ASX: PRY).
Expansion opportunities.
As well as having opportunities to expand its current sites through brownfield expansions, I believe Ramsay's strong cash balance ($409 million) and low debt leverage puts it in a position to make earnings accretive acquisitions. Furthermore, although it has no plans at this point, I do expect that one day we will see the company expanding into the lucrative China market. Considering the size of the opportunity in the country, it could be a significant driver of long-term growth.
