Ramsay Health Care shares rise as Morningstar predicts long-term growth
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More news: Ramsay Health Care shares climbed on the ASX after Morningstar flagged that the private hospital operator was undervalued.
Ramsay shares were up 2.3% to $35.16 by 2:10pm AEDT, having shed around 20% since August.
Ramsay Health Care undervalued despite headwinds: Morningstar
The news: Morningstar has said that shares in private hospital operator Ramsay Health Care are undervalued, after sliding around 20% since August last year.
The numbers: Morningstar said that Ramsay shares now trade at roughly a 40% discount to its unchanged fair value estimate of $62. Shares last closed at $34.38 and over the last 12 months has plunged 32.86%.
Morningstar forecasts Ramsay's group profitability to improve to an EBIT margin of 10% by FY29 compared to 6% in FY24. It also expects Australian operating margins expanding to 14% by FY29 versus 11% in FY24.
The context: The investment house noted that while wage growth is likely to outpace tariff indexation in Europe near-term, the market has a "myopic view" of the Ramsay's profitability.
Morningstar expects margin expansion over the long term as activity trends in higher-margin work recover and staff availability increases. In addition, while margins are constrained by digital expenses in the near term, this is likely to drive cost efficiencies in the longer term by optimising staff levels and reducing administrative paperwork, Morningstar said.
The source: Morningstar research
