Is this beaten-down ASX healthcare share a bargain buy now?

One expert has given their view on this stock.

| More on:
A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price

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

The ASX healthcare share NIB Holdings Ltd (ASX: NHF) has suffered a sizeable decline in the last few months. It's worth asking the question if it's attractive after the drop of more than 20% since August.

Created with Highcharts 11.4.3NIB Holdings PriceZoom1M3M6MYTD1Y5Y10YALL1 Aug 202414 Nov 2024Zoom ▾12 Aug26 Aug9 Sep23 Sep7 Oct21 Oct4 NovAug '24Aug '24Sep '24Sep '24Oct '24Oct '24Nov '24Nov '24www.fool.com.au

Sell-offs can be opportunities if the company rebounds. But there's no guarantee that will happen if economic pain sticks around for the long term.

There is a lot of uncertainty in the private healthcare space right now, so let's look at a couple of the issues that insurers are facing.

Two important issues for the ASX healthcare share

Private health insurers reportedly want to implement a premium increase of between 5% and 6% in April, which would represent the largest increase since 2016. NIB CEO Mark Fitzgibbon said the company is expecting claims inflation to be between 4% to 6%.

Last time, Health Minister Mark Butler only granted a premium increase that was about half of what insurers had requested.

If costs rise faster than revenue, the ASX healthcare share could see declining profit margins.

Another issue is the battle between private hospitals and private health insurers. Over the last several years, private hospital profitability has decreased, while private health insurer profits have risen, particularly during the COVID period.

It's a tricky dynamic, with the Australian government, households, private hospitals, and private health insurers all involved in the funding conversation.

Is the NIB share price a buy?

Broker UBS is bullish about the prospects for NIB shares in the next year.

A price target is where the broker thinks the share price will be 12 months from the time of the note. Currently, UBS has a price target of $8.50 on NIB, which implies a possible rise of close to 50% from today's level.

NIB recently provided guidance for its FY25 underlying operating profit (UOP) of between $235 million and $250 million.

The business said in the recent update that its Australian resident health insurance business is growing strongly, with net policyholder growth for the first four months of FY25 up 25% year over year. Its annualised growth rate of 3.2% is likely well ahead of average system growth.

The company expects its net margin for the full financial year to be "in the order" of 6% to 7%, which is in line with its target range.

However, the ASX healthcare share said there has been "extraordinary" growth in New Zealand claims, which is weighing on performance, where it's expecting an operating loss in the first half of FY25 of about AU$10 million. But, conditions are expected to improve in New Zealand, with higher pricing, operating cost savings, and claims inflation moderating.

At the current NIB share price, it's valued at 13x UBS' FY25 estimated earnings.

Should you invest $1,000 in Nib Holdings right now?

Before you buy Nib Holdings shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Nib Holdings wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 7 February 2025

Motley Fool contributor Tristan Harrison 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 positions in and has recommended NIB Holdings. 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

Stethoscope with a piggy bank in the middle.
Healthcare Shares

With revenue up 9%, why does the NIB share price keep falling?

Will the ailing share price make a full recovery?

Read more »

Six smiling health workers pose for a selfie.
Healthcare Shares

Guess how much $5,000 invested in Sigma shares in December 2023 is worth now!

Sigma shares have soared over the past year alongside the merger with Chemist Warehouse.

Read more »

Woman with headphones on relaxing and looking at her phone happily.
Healthcare Shares

Everything you need to know about the latest CSL dividend

CSL's latest dividend should be turning investors' heads...

Read more »

thoughtful investor sitting at computer
Healthcare Shares

What are brokers saying about CSL shares after the selloff?

The biotech giant's shares hit a 52-week low yesterday. Is this a buying opportunity?

Read more »

A man looking at his laptop and thinking.
Earnings Results

CSL shares push higher despite 'mixed result with headline misses'

There were positives and negatives in the company's first half performance.

Read more »

Scientists working in the laboratory and examining results.
Earnings Results

CSL share price on watch amid $2.1b half year profit and dividend hike

Let's see how this biotech giant performed during the first half of FY 2025.

Read more »

Two lab workers fist pump each other.
Healthcare Shares

Guess which ASX 300 healthcare stock just rocketed 20% on BIG earnings growth

Investors are piling into the ASX 300 healthcare stock on Monday. But why?

Read more »

Health professional putting on gloves.
Earnings Results

Why this ASX 200 share is soaring in Monday's sinking market

The ASX 200 share is shrugging off the broader market fall today to rocket higher. But why?

Read more »