Australian Investment Blog

Are Cracks Forming in the Healthcare Sector? Yesterday, Merrill Lynch downgraded Estia (EHE), Japara (JHC) and Regis Healthcare (REG), with the view that the companies are facing no future earnings growth. These 3 company's operate aged care facilities around Australia and yesterday’s research report hit the stocks hard, EHE -5.7%, JHC -9% and REG -8.5%. However, the local Healthcare Sector made all-time highs last month and is currently showing no reason to abandon the sector on mass, but individual stocks may tell a different tale. The Healthcare Sector is trading on a p/e ratio of 28x, more than double that of CBA, yet it pays a dividend of only 1.9% compared to CBA's of 5.5% fully franked. These simple numbers are absolutely fine if the healthcare stock is demonstrating growth going forward, BUT very dangerous if it's not. Today we are will look to identify any members of the sector that look vulnerable to us, plus whether yesterday’s sell off is presenting potential buying opportunities in the 3 battered stocks.
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