The Ramsay Health Care Limited (ASX: RHC) share price is close to its 52-week low, it's currently $63.10.
Ramsay is Australia's largest private hospital operator and also has operations overseas. I believe it's worth asking if Ramsay is worth a buy at today's price.
Bull case
Ramsay is highly exposed to the ageing demographic tailwind because its main group of patients are the elderly – sadly the old we get the more likely we'll need a hospital visit. The number of people over 65 is expected to grow by 75% over the next 20 years, which should mean a lot more patients.
The private hospital operator is investing for further growth by expanding its current hospitals and building new ones. The company also has plans to grow into a new geographical area like North America or China in the next few years.
Ramsay is a very high quality business and has effective management. I think it's a well-run company and it wants to reward shareholders when it can. Ramsay has increased its dividend every year since 2000.
Bear case
However, the Ramsay share price has dropped for a reason. Firstly, the rising interest rates in the US makes defensive shares like healthcare businesses look less interesting, plus rising interest rates theoretically have negative effects on all asset prices.
The recent Ramsay result was not very inspiring. Both the UK and France segments of Ramsay didn't perform well in the latest result. The UK revenue fell by 4.8% and the France revenue dropped by 1.1%. It is a worry that Ramsay's statutory earnings per share (EPS) dropped by 3.6% in the December 2017 half-year result.
There is also a big issue surrounding the affordability of private health insurance, which has a big knock-on effect for companies which rely on the number of policyholders being maintained or hopefully growing. If private health insurance premiums rises slow dramatically or the number of policyholders decrease then Ramsay could be in trouble.
Foolish takeaway
Ramsay is currently trading at 20x FY19's estimated earnings, which seems like a reasonable price to pay for a high quality business. It also has a grossed-up dividend yield of 3.14%. I can understand why people would think it's a buy and a sell. In the short-term it may go down further but in the long-term I think it will make a good holding.
