The latest earnings announcement Ramsay Health Care Limited (ASX:RHC) released in June 2018 suggested that the company faced a substantial headwind with earnings falling by -21%. Below, I’ve presented key growth figures on how market analysts perceive Ramsay Health Care’s earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ expectations for this coming year seems positive, with earnings rising by a robust 45%. This growth seems to continue into the following year with rates reaching double digit 59% compared to today’s earnings, and finally hitting AU$642m by 2022.
Although it is informative understanding the rate of growth each year relative to today’s value, it may be more beneficial to gauge the rate at which the earnings are rising or falling on average every year. The pro of this method is that we can get a bigger picture of the direction of Ramsay Health Care’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 12%. This means that, we can expect Ramsay Health Care will grow its earnings by 12% every year for the next few years.
For Ramsay Health Care, there are three relevant factors you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is RHC worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether RHC is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of RHC? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.