Yahoo Finance Is Estia Health Limited (ASX:EHE) Cheap And High Growth?
Estia Health Limited (ASX:EHE), a AU$820.90m small-cap, operates in the healthcare industry, which continues to be affected by the sustained economic uncertainty and structural trends, such as an aging population, impacting the sector globally. Healthcare analysts are forecasting for the entire industry, a strong double-digit growth of 15.66% in the upcoming year , and a strong near-term growth of 25.23% over the next couple of years. However, this rate came in below the growth rate of the Australian stock market as a whole. Today, I’ll take you through the sector growth expectations, and also determine whether Estia Health is a laggard or leader relative to its healthcare sector peers.
Check out our latest analysis for Estia Health
What’s the catalyst for Estia Health’s sector growth?
Providers that are beginning to turn their attention to more transformative initiatives to bend the cost curve. In the past year, the industry delivered negative growth of -0.14%, underperforming the Australian market growth of 9.58%. Estia Health leads the pack with its impressive earnings growth of 35.09% over the past year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be 12.95% compared to the wider healthcare provider sector growth hovering in the teens next year. As a future industry laggard in growth, Estia Health may be a cheaper stock relative to its peers.
Is Estia Health and the sector relatively cheap?
Healthcare companies are typically trading at a PE of 20.45x, relatively similar to the rest of the Australian stock market PE of 18.01x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 11.27% on equities compared to the market’s 11.95%. On the stock-level, Estia Health is trading at a PE ratio of 19.84x, which is relatively in-line with the average healthcare provider stock. In terms of returns, Estia Health generated 5.42% in the past year, which is 5.86% below the healthcare provider sector.
Next Steps:
If Estia Health has been on your watchlist for a while, now may not be the best time to enter into the stock. The company is a healthcare provider industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the healthcare sector. However, before you make a decision on the stock, I suggest you look at Estia Health’s fundamentals in order to build a holistic investment thesis.
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.
Historical Track Record: What has EHE’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Estia Health? 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.
