NMC Health, the medical services Group has enjoyed meteoric share price growth over the last 12 months, returning a fantastic 98% growth for shareholders over the period, which has seen it promoted into the UK’s flagship FTSE 100 index.
It’s not just the last 12 months that the share price has impressed either. The Group has shown growth of almost 500% over 3 years and a whopping 1436% over 5 years. How we all wish we’d be there at the start eh?
*Chart indicates price at previous day’s close
The question is, how much further can the Group go before they reach a tipping point?
Historically, FTSE 100 companies are not renowned for their growth prospects. However, a look at NMC Health’s fundamentals suggests the Group’s share price may, indeed, have plenty of life left.
NMC Health fundamentals
Stockbroker, Berenberg provided a Buy rating on 6th October with a target price of 4000p, while Jefferies reiterated their Hold recommendation on 3rd October with a target price of 2810p, a level that has been surpassed, with the share price at the time of writing at 2889p.
However, despite the conflicting broker evidence, the consensus forecast is for the Group to increase year end profit from £117m to £181m for the 2017 period, up to £249m in 2018.
Even when taking into account the outperformance of their share price, those profit forecasts represent an attractive forward PEG ratio of 0.68, suggesting there’s still plenty of growth in the current price.
So, how are they able to continue their growth rate?
Simple really. Expansion – with a focus on their native United Arab Emirates primarily.
That’s through both the development of new medical facilities and the acquisition of complimentary businesses. The Group has sought to fill gaps in the healthcare needs of the UAE to become the region’s largest private healthcare provider.
NMC’s gearing is high – something you would expect from a business that is maintaining an acquisition strategy. However, the business appears to have the ability to meet these debts – the quick ratio is 1.52 – while interest cover is is at 6x , suggesting a sound financial footing.
A strategy which CEO and executive vice-chairman BR Shetty touched upon in his March statement:
“In recent years NMC has expanded its asset and brand portfolio organically and inorganically into additional healthcare services segments, extended our presence across the continuum of care, entered into higher growth and margin specialties with very favourable regional supply/demand dynamics, and selectively entered new geographies to position the group at the intersection of multiple growth channels to the ultimate benefit of all our stakeholders.”
The stock has momentum, five years worth in fact, which will find favour with investors. Make a note in your diary for early March 2018 when the full year results are published. Let’s see if the NMC Health share price can continue its positive momentum for another year.