U.S. Markets open in 49 mins

Will Ramsay Health Care Limited’s (ASX:RHC) Earnings Grow Over The Next Year?

Lee Kay

Based on Ramsay Health Care Limited’s (ASX:RHC) earnings update in June 2018, analyst consensus outlook appear cautiously optimistic, with profits predicted to increase by 44% next year compared with the past 5-year average growth rate of 12%. By 2020, we can expect Ramsay Health Care’s bottom line to reach AU$542m, a jump from the current trailing-twelve-month of AU$376m. Below is a brief commentary on the longer term outlook the market has for Ramsay Health Care. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

See our latest analysis for Ramsay Health Care

How will Ramsay Health Care perform in the near future?

The view from 13 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of RHC’s earnings growth over these next few years.

ASX:RHC Future Profit January 28th 19

By 2022, RHC’s earnings should reach AU$646m, from current levels of AU$376m, resulting in an annual growth rate of 13%. This leads to an EPS of A$3.3 in the final year of projections relative to the current EPS of A$1.87. In 2022, RHC’s profit margin will have expanded from 4.1% to 5.0%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Ramsay Health Care, I’ve compiled three key factors you should further examine:

  1. 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.
  2. Valuation: What is Ramsay Health Care 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 Ramsay Health Care is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Ramsay Health Care? 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 editorial-team@simplywallst.com.