The average target price of RHC.AX is 42 and suggests 7% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 58.0. This translates into 50% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 37.1. This is equivalent to 4% downside potential in the worst case. 

Ramsay Health Care Limited owns and operates hospitals. The company also offers health care services to public and private patients. It operates facilities in approximately 532 locations in the Asia Pacific, the United Kingdom, France, and Nordics. The company was founded in 1964 and is based in Sydney, Australia.

Australia

Ramsay Health Care Limited

Healthcare

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has been moderate and on par with its peers. On average, the company pays dividends twice a year. 

RHC.AX reported revenue of AUD 17 119mn in the last 12 months, up 7% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 100% from FY23 to AUD 0.00. Market expects EPS to reach AUD 1.28 in FY25.

Over the last six months, the stock performance has varied, with an increase following a drop. When compared to its international counterparts in the same sector and industry (as shown above), the stock has exceeded their performances, leading by 16ppts in total. There is a distinction between the stock's performance and that of its peers from the same country and industry. Over six months it exceeded the performance of this peer group by 25ppts and its growth decelerated by 1ppts in the previous month. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 12.0% in the last 12 months, up from 10.9% in FY24. 

Historically, RHC.AX has reported weak net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 0.1%, down from 5.4% in FY24. 

Ramsay Health Care Limited reported a return on equity (RoE) of 0.5% in the last 12 months, down from 18.4% in FY24. The market consensus projects an RoE of 17.7% in FY25, this time above its peers. 

Another important profitability metric, return on assets (RoA), amounted to 0.1% in the last 12 months, a decrease from 4.3% in FY24. The market analysts predict that RoA will be 4.1% in FY25, again weaker than its peers. 

In the last 12 months, the return on capital employed (RoCE) declined to 0.1%, below the peers. The consensus estimate for FY25 for RoCE is 4.1%, again behind the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.6 in the past several years. This ratio implies a poor shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

RHC.AX boasts high trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually quite stable and remains mildly favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to slow historical revenue growth, negligible return on capital, weak debt servicing capacity, and an unfavourable capital structure. 

In highly turbulent market conditions, RHC.AX is not volatile. In other words, the stock will fall far less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be very low. 

In normal market circumstances, RHC.AX is not volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. 

From both historical and forecast perspectives, the stock is moderately underpriced compared to similar stocks. Specifically, the stock is 'expensive' on P/E, undervalued on EV/EBITDA, underpriced on P/FCF. 

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Ramsay Health Care Limited

A$ 38.77

6

Ramsay Health Care Limited

A$ 38.77

6

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

A$ 38.77

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