Ramsay Health Care Limited Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

It's been a good week for Ramsay Health Care Limited (ASX:RHC) shareholders, because the company has just released its latest half-year results, and the shares gained 6.2% to AU$66.00. Revenues were AU$6.6b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of AU$0.97 were also better than expected, beating analyst predictions by 11%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Ramsay Health Care

Taking into account the latest results, the most recent consensus for Ramsay Health Care from twelve analysts is for revenues of AU$13.0b in 2021 which, if met, would be a credible 7.1% increase on its sales over the past 12 months. Statutory earnings per share are predicted to leap 69% to AU$2.22. In the lead-up to this report, the analysts had been modelling revenues of AU$13.0b and earnings per share (EPS) of AU$2.04 in 2021. So the consensus seems to have become somewhat more optimistic on Ramsay Health Care's earnings potential following these results.

The consensus price target was unchanged at AU$69.14, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Ramsay Health Care, with the most bullish analyst valuing it at AU$80.00 and the most bearish at AU$50.00 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Ramsay Health Care's rate of growth is expected to accelerate meaningfully, with the forecast 7.1% revenue growth noticeably faster than its historical growth of 5.2% over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 1.8% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Ramsay Health Care is expected to grow much faster than its industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Ramsay Health Care's earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at AU$69.14, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Ramsay Health Care analysts - going out to 2024, and you can see them free on our platform here.

You still need to take note of risks, for example - Ramsay Health Care has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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