The NMC Health share price has climbed 30%, so should you buy?

FTSE 100 (INDEXFTSE: UKX) former growth stock NMC Health (LON: NMC) has fallen from grace, but will a takeover save it?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

NMC Health (LSE: NMC) has certainly had a high-profile life.

In the latest twist to its story, the firm announced on Monday that it’s the target of not one, but two “highly preliminarytakeover approaches. There have been no actual proposals made, but Kohlberg Kravis Roberts & Co and GK Investment Holding Group were named as the potential suitors.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

The NMC share price finished Monday 32% ahead, so what should we do now?

The UAE-based healthcare provider has become vulnerable to takeover approaches since its recent share price slump, triggered by December’s short-selling attack from Muddy Waters. The famous research group published a scathing report on the company, accusing it of balance sheet manipulation and of inflating the prices of purchased assets.

Since then, I’ve been expecting to see a detailed rebuttal and a transparent response to the individual claims. But other than denials, that has not really been forthcoming.


In a further twist, it appears the company doesn’t even know who owns it. In fact, even founder and chairman Bavaguthu Raghuram Shetty doesn’t seem to know how much he owns. His stake, the firm says, together with those of two other controlling shareholders, might have been “incorrectly reported historically to the company and the market.” The three of them will be absent from further board discussions until a legal review into the affair is concluded.

NMC shares are now down 64% since the Muddy Waters attack came to light, despite Monday’s uptick. They had previously been on high growth valuations, with a trailing P/E of 26 for 2018. We’re now looking at a multiple of 8 based on prior City expectations for the year just ended, and that drops as low as 5.3 as far out as December 2021.

Forecasts must be entirely up in the air now, mind. They’re hard to get right at the best of times, when a well-managed company is behaving totally transparently. But if any of Muddy Waters’ allegations prove correct, they could prove worthless. And remember, this is a company that can’t count the shareholdings of even its top controlling investors.


But NMC still looks like a viable business, even if its valuation has been badly rocked. And if we have two possible buyers taking an interest, are we looking at a big buying opportunity now?

In the past, I’ve been bullish about NMC Health. But the revelations of the past couple of months have shattered any optimism I had. I’m really quite stunned that a FTSE 100 company can be alleged, suddenly, to be in such a state.


From where I’m standing, the management of NMC Health looks shambolic. And at best, its approach to transparency appears to be incompetent.

If a takeover bid does emerge, I think it could provide a welcome escape for NMC shareholders. Without it, I could see the share price drifting ever lower. But I’m not a shareholder, and that’s the way it’s staying. I wouldn’t trust my money to NMC Health.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended NMC Health. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

Here’s a FTSE 250 stock to buy to benefit from the construction boom!

Jabran Khan details a FTSE 250 stock that could be primed to benefit from the infrastructure and construction boom.

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Is the Royal Mail share price a buying opportunity?

With a 6% dividend yield and a price-to-earnings ratio of 3, is the Royal Mail share price in buying territory?…

Read more »

Scene depicting the City of London, home of the FTSE 100
Investing Articles

3 FTSE 100 shares! Should I buy them?

I'm searching for the best FTSE 100 stocks to buy following recent market volatility. Are these blue-chip UK shares too…

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

Should I buy one of the cheapest shares on the FTSE 100 index?

This Fool explores one of the cheapest stocks on the FTSE 100 index by share price and decides if he…

Read more »

Asian Indian male white collar worker on wheelchair having video conference with his business partners
Investing Articles

With trading suspended, where could the Eurasia Mining (LON:EUA) share price go next?

This morning, the EUA share price was suspended pending an announcement - so could improving sales send the share price…

Read more »

Hand holding pound notes
Investing Articles

Are the FTSE 100’s top income stocks a bargain?

The FTSE 100 is renowned for its value and dividend stocks. So, are the index's top income stocks worth a…

Read more »

Compass pointing towards 'best price'
Investing Articles

Scottish Mortgage shares have slumped 40%. Time to buy now?

Scottish Mortgage Investment Trust (LON: SMT) shares have rewarded shareholders well in recent years. I'm thinking of buying now they're…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

3 recession stocks I’d buy in a hurry

With the economic outlook getting worse, our writer highlights a trio of recession stocks he would consider buying for his…

Read more »