Sonic and Ramsey – Value has Emerged
We feel both Sonic and Ramsey Healthcare are now reaching oversold price levels.
Algo Update – Sonic & Ramsey Healthcare
Our Algo Engine has triggered recent buy signals in SHL and RHC, we feel both of these names are now trading into an oversold price range and buying support will soon develop.
Ramsey Healthcare – FY17 Earnings
Ramsey reported FY17 NPAT in line with guidance at A$543 million, up +12.7% on the same time last year. Revenue was also in line at A$8.7 billion.
All divisions contributed to earnings growth with Australia & Asia as the standout.
Assuming underlying EPS growth of 15% into FY18, we have Ramsey on a 2.2% forward yield, as dividends increase to $1.45 per share.
We view Ramsey as a strong buying opportunity on the next higher low formation, or Algo Engine buy signal.
Ramsey Healthcare – Reports 30th August
We continue to like the following healthcare names, RHC, RMD, SHL, CSL and MPL.
Ramsey Healthcare reports FY17 earnings on the 30th of August and consensus is looking for $537m.
FY18 EPS is forecast to increase by 20% to $2.60, DPS $1.32 placing the stock on a forward yield of 1.8%.
Take Profit – Ramsey Healthcare
After buying Ramsey Healthcare on the recent pullback to $68.50, we now look to take profit at today’s price levels.
Within the healthcare space, we continue to like SHL, RMD, CSL and Ramsey Healthcare. Although, they’re starting to look a little expensive from a PE perspective.
Trimming profits with a view to buying back in on a pullback makes sense, or selling tight covered call options at current price levels.
Ramsay Healthcare Update
When we last updated Ramsay Health Care (RHC) on March 7th, we pointed out that the strong earnings potential and solid dividend growth were reasons for holding the stock.
Since then, RHC has moved just over 5% higher and has a bullish technical structure.
The current price is comfortably above the 30-day moving average at $67.75 and we have a medium-term target of $73.00.
Ramsey Healthcare
Ramsay Health Care
Since posting a high of $84.00 last September, shares of Ramsay Heath Care have dropped almost 20% to below 67.50 today.
This decline has adjusted the share price to 26 X estimated 2017 earnings. While this multiple is not cheap, it looks like fair value considering Ramsay’s strong long-term growth prospects and dividend history.
Since the private hospital operator started paying dividends in 2007, it has increased its payout to shareholders every singe year. This is a streak that includes 21 consecutive dividend increases.
Based on the last 12 months of dividends, Ramsay’s shares are currently offering a fully-franked 4.8% yield, which tips up to almost 7% when the franking credits are included.
Further, the company has given guidance that 2017 profits could increase by 20%.
Healthcare Algo Buy Signals
At this point in the market we prefer healthcare names as a sector allocation for new money. Here are the recent buy signals generated by our Algo Engine.
With SHL, CSL and ANN we’ve added covered calls to boost the annualised cash flow to over 10%, whilst still allowing for capital growth if exercised at the strike price of the sold call.
Healthcare – Watch For Buying Interest
Healthcare names are being sold off due to their high PE ratios and negative sentiment towards the sector, which is permeating from the US healthcare stocks leading the sell off.
Keep these on your watch list as the selling will likely exhaust and we’ll look for entry levels triggered by the algo engine.
Ramsey Helthcare – Algo Engine Buy Signal
Ramsey Healthcare is now trading back on the $70 support level and buying interest is building.
The algo engine is flagging the bullish higher low structure and we therefore look to buy the stock here and sell $75 calls with a May 17th expiration date.
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