Is the Ramsay Health Care Limited (ASX: RHC) share price a buy?
Since the middle of September 2019 the Ramsay share price has gone up by 17% and over the past year the Ramsay share price has risen by just over 34%. Very impressive considering how defensive and slow-growing Ramsay is. FY19 wasn't a terrible result, but not great, core net profit rose 2%.
Some of the improvement was down to the Liberals winning the election because Labor's premium growth limit was no longer going to be applied.
The Capio acquisition in Europe has also added a lot of diversification to Ramsay's earnings and may mean it's more defensive than before. The Australian private health industry has been finding it tough in recent years because of the increasing unaffordability of it, particularly for younger Australians as premiums have gone up much faster than wages or inflation.
However, those price increases have been because health costs have been going up so much. Australia (and other western countries) are facing an ageing population that should mean more people going through hospital doors. Ramsay is a beneficiary here.
The number of people over 65 is expected to grow by 40% over the next decade, which is a powerful tailwind when combined with price increases by Ramsay and new & expanded hospitals.
Foolish takeaway
Ramsay's outlook for FY20 for core earnings per share (EPS) on a like for like basis is another 2% to 4%.
The company is managing to grow profit but it's slow going. Ramsay is trading at more than 25x FY19's earnings. That seems expensive for little growth and its dividend yield is not very high either at 3%, grossed-up. Ramsay is a solid business, but it's not a buy for me at this price.
