Is the Medibank share price a smart buy for rising inflation?

Are Medibank shares a buy today? One expert shares their thoughts.

| More on:
A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

When it comes to inflation, the Medibank Private Ltd (ASX: MPL) share price might just jump to mind. After all, the costs of all private health insurance (not just Medibank's) have been rising by more than the rate of inflation for years now.

But now we've just received confirmation that inflation in the Australian economy is at an annualised rate of 6.1% (the highest in decades), ASX investors have inflation to worry about.

Medibank is the largest provider of private health insurance in the country. It used to be a government-owned company, but was privatised back in late 2014 and listed on the ASX.

Since that time, the Medibank share price has appreciated by 58.5%. That's including the 0.3% loss Medibank shares have clocked so far today, putting the company at $3.44 a share. That works out to be a compounded annual growth rate of approximately 6.34%, not including dividend returns.

So is the Medibank share price a smart buy for rising inflation going forward? Let's see what one expert investor reckons.

Is the Medibank share price a buy today?

According to Livewire, ASX broker UBS has just upgraded its rating on Medibank shares. The broker has raised its rating on Medibank shares from "neutral" to "buy". That came with a 12-month share price target of $3.90. That's up from the previous target of $3.35.

If Medibank shares do rise to $3.90 over the coming year, it would result in an upside for investors of 13.4% from the current share price.

UBS has identified Medibank as a share to buy in these inflationary times. UBS analyst Scott Russell reportedly cited Medibank's "relatively stable revenues and predictable margins, improving claims trends assisted by [government] policy, and rising investment yields among its attractive attributes".

"Whilst the stock doesn't look cheap at around 20 times PE [price-to-earnings ratio], we think these attributes are unique amongst financials and attractive at this point in the cycle," Russell said.

So that's a fairly bullish outlook on the Medibank share price. No doubt investors will be happy with that assessment. But we shall have to see what the coming 12 months bring to the table for Medibank shares.

At the current Medibank share price, this ASX 200 healthcare share has a market capitalisation of $9.47 billion, with a dividend yield of 3.78%.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Healthcare Shares

a biomedical researcher sits at his desk with his hand on his chin, thinking and giving a small smile with a microscope next to him and an array of test tubes and beackers behind him on shelves in a well-lit bright office.
Healthcare Shares

Broker says this ASX 200 biotech stock is a top buy

Let's see what Bell Potter is saying about this biotech.

Read more »

Cropped shot of an attractive young female scientist working on her computer in the laboratory.
Healthcare Shares

Why CSL shares are a buy today despite the looming Trump tariffs

A leading expert believes CSL shares are still trading for a bargain today. Here's why.

Read more »

A businesswoman pulls her glasses down in shock to look at the bad news on her computer.
Healthcare Shares

Why did the Telix share price just crash 16%?

Investors are sending the Telix share price plunging today. But why?

Read more »

Broker analysing the share price.
Healthcare Shares

Expert: 2 ASX healthcare stocks to avoid before reporting season

Not all healthcare stocks are created equal.

Read more »

A group of people in a corporate setting do a collective high five.
Healthcare Shares

Should I buy Pro Medicus or CSL shares ahead of earnings season?

The ASX healthcare sector may be currently undervalued.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Healthcare Shares

Why Mesoblast shares can keep storming higher

More big returns could be on the way for buyers of this high risk stock according to Bell Potter.

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »

couple having a happy discussion with a banker
Healthcare Shares

Expert: 4 ASX healthcare stocks to buy ahead of reporting season

Could these ASX healthcare stocks be good additions to your portfolio?

Read more »