If you have £1,000 going spare, there’s one FTSE 100 company that I believe deserves your money more than any other business.
Over the past few decades, the FTSE 100 has turned out a steady average annual return of around 8%. Private hospital provider NMC Health (LSE: NMC) has smashed this record by a wide margin.
Over the past five years, the shares have produced an average annual total return of just under 64%. At this rate, if you’d invested £1,000 in the company back in 2013, today your investment would be worth approximately £12,000.
The question is, can investors expect a similar rate of return over the next five years? I believe there’s a good chance that they can.
Bigger and better
Since 2013, NMC’s management has achieved an outstanding record of earnings growth. Earnings per share (EPS) have risen by approximately 160% in five years (to the end of 2017). Analysts expect this trend to continue. EPS growth of 47% is projected for 2018, followed by an increase of 30% in 2019.
And if the company meets these forecasts, EPS will be up just under 400% in seven years. For a PLC with a market capitalisation of £7.6bn, this rate of growth is nothing short of outstanding.
Unfortunately, NMC’s potential is well known, and the market is placing a significant premium on the shares. They currently trade at a historical earnings multiple of 49.7. However, on a forward-looking basis, the shares are trading at a 2019 P/E of 26. That’s not too demanding, but plenty could go wrong over the next two years.
Still, I’m confident that this private healthcare provider is well placed to continue to snowball, not just for the next two years but for the next several decades. The group operates healthcare facilities around the globe although its assets are primarily concentrated in the United Arab Emirates, the wealthiest country in the world on a per capita basis.
As demand for healthcare is only going to grow, NMC is unlikely to struggle long term. So if you are looking to add to your retirement portfolio, in my opinion NMC is indeed worthy of further research.
Another business that looks as if it has attractive long-term prospects is children’s services provider Cambian (LSE: CMBN). Today, this company announced that it had achieved a 7% increase in revenues for the first half of 2018, along with a 40% jump in adjusted earnings before interest, tax, depreciation and amortization reflecting revenue growth and a reduction in overheads.
Net cash on the balance sheet increased to £75m following the payment of a special dividend at the beginning of 2018.
These results are likely to be the company’s last as an independent business. CareTech Holdings is buying the firm for 100p in cash and 0.267 of a CareTech share, for a total consideration of 190p. The deal is expected to generate approximately £6m in cost savings. Considering the strengths of the Cambian business, I believe this could be an excellent combination.
Cambian shareholders will end up owning approximately 34% of the enlarged business allowing them to benefit from further growth in the years ahead. City analysts believe that as one, Cambian/CareTech will see earnings growth of nearly 10% in 2019.