FTSE 100 healthcare provider NMC Health (LSE: NMC) has had a great run at the stock markets in the past week, with its share price rising on average by 9% compared to last week, at the time of writing. That’s saying a lot for a share that hasn’t had much of a past year at the equity markets. I mean, even after the latest increase, the share price is still at just about the average level for 2019, which indicates how much it had declined.
Now I’m now really curious to know – is the worst over for the NMC and will it now go back to being the steady performer it has been over the past years? Because if the that is indeed the case, then it is an investment truly worth considering.
Strong, growing, and safe
Fundamentally, there’s little to dislike about NMC. The company, which is focused on the Middle East, has seen a steady rise in revenues over the years and has also seen profit growth. Its latest half-year results, which were released a few months ago, also showed that NMC’s performance continues to be robust with a 32.6% year-on-year increase in revenue and 22% earnings increase. It subsequently raised its full-year guidance as well.
And there’s more. NMC is a defensive stock, which is good to have in the investment portfolio at any point but is an even more welcome addition right now, when macroeconomic prospects are uncertain at best. The fact that the company’s geographical concentration is not the UK or even Europe is also a good hedge at the present.
Returns on capital
My primary discomfort with NMC is the lack of clear explanation for last year’s plunge in share price, and why it continues to show sideways movement after years of great performance. In the five years from 2013, not long after it was listed on the London Stock Exchange, it rose more than 11 times on average.
Yet, by 2019, the NMC share price has dropped by 27% from its 2018 high for no apparent reason. Also, I’m mildly uncomfortable that, despite the drop in price, NMC’s price-to-earnings (P/E) ratio is over 19 times, which isn’t cheap by any stretch.
This share is a clear buy; the only remaining question on my mind is when to buy. The ideal time would be just before it starts what would appear to be its inevitable and consistent upward rise. But that can be notoriously hard to predict. If you are like me and think that your money would be better off elsewhere than with a share price that can’t seem to make up its mind about where it’s going, it can also be frustrating.
But it may be small price to pay for a company that, otherwise, is performing well. I’d buy the shares soon enough.