Is this FTSE 250 stock a no-brainer buy?

A female doctor wearing a white coat meets a female patient in the office

Image source: Getty Images

With 6.8m people on NHS waiting lists, I’ve been watching. FTSE 250 Stock to help ease the backlog.

Spire Healthcare (LSE: SPI) is the UK’s largest private hospital group by revenue, owning 39 hospitals and 8 clinics across the country.

Even uttering the phrase ‘personal healthcare’ is enough to garner dirty looks in some social circles in the UK.

However, this piqued my interest even more. The less ‘lust-inducing’ an investment theme is, the more likely I am to get in at a reasonable price. Although not popular, private providers are playing an increasing role in the health care space.

In the first six months of 2022, Spire Healthcare’s revenue from private patients rose 30.9 percent compared to the first half of 2019.

Is it time for the outbreak to shine?

Spire Healthcare placed its buildings, equipment and staff on NHS disposal during the outbreak. The NHS has paid the organization for services provided during this emergency. Still, it wasn’t enough to keep Spire Healthcare from making £18.5m of losses in 2020 (adjusted before tax).

In the year In 2019, Spire Healthcare earned adjusted earnings of 1.8 pence per share. In the year By 2021, that has turned negative, with the firm losing 3.6 pence per share.

Still, the share price has continued to rise steadily from its 2019 earnings high of 139p to 250p at the end of 2021, despite negative earnings publications.

This was because markets were looking ahead and it was clear that a huge patient backlog would be created by suspending selection processes to allow the NHS to focus on Covid.

First, the good news

Inflation is at the forefront of investors’ minds this year, and Spire Healthcare can clearly say it’s less vulnerable than most businesses. According to research conducted by the group, “The typical private patient can afford private care, and health care is a key spending priority.He said.

Spire Healthcare also said it is targeting supplier pricing in the medium term to further dampen inflation on its bottom line.

The group eased its debt burden in a rising interest rate environment by paying off £100m of bank debt this year and reducing net debt to 2.2 times EBITDA, its lowest leverage ratio since 2016. .

Holy cow…

Things that are currently tailwinds for Spire Healthcare are quickly going against it in my view. The NHS is a sacred cow in Britain, and I’m not betting that private providers can exploit the problems of the public sector for long without political fallout.

In the year In 2019, the Labor Party manifesto stated its intention to end the use of private providers in the NHS. If approved, that would wipe out about a quarter of Spire Healthcare’s revenue.

Given Spire Healthcare’s rich price-to-earnings (P/E) ratio of 141, investors have become overly sensitive to political risks.

For this reason, I wouldn’t buy shares in Spire Healthcare despite the many headlines about patients on NHS waiting lists turning to private providers out of frustration.

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