Finding stocks that you can buy and hold the long term is a tricky process but there are some companies that are better suited to an extended holding period than others. Pension providers, for example, have a business model built around long-term investing and highly defensive medical as well as pharmaceutical companies are also well-positioned for the long term.
Long term growth
Healthcare facilities operator Mediclinic International (LSE: MDC) has approximately 70 hospitals and over 40 clinics under its umbrella, and the company is well-positioned to profit from both the world’s ageing population and rising incomes in developing nations.
The company’s hospitals are located in South Africa, Namibia, Switzerland, and the Middle East. Earnings growth has been explosive in recent years with revenue and pre-tax profit rising from $365m and $61.5m respectively in 2013 to an estimated $2.75bn and $296m for the fiscal year ending 31 March 2017. City analysts are expecting earnings per share to rise by nearly a third over the next three fiscal years. From a projected 29.8p for the fiscal year ending this March, earnings per share are expected to hit 41p for the year ending 31 March 2019.
Considering this growth as well as the company’s defensive nature, shares in Mediclinic look relatively attractively priced at current levels.
Indeed, at the time of writing shares in the company trade at a forward (fiscal year ending 31 March 2018) P/E of 20.9, falling to 18.3 for the following year. For comparison, shares in peer NMC Health currently trade at a forward P/E of 28.2 and shares in Georgia Healthcare trade at a forward P/E of 25.4. On this basis, compared to its peer group, Mediclinic’s shares look undervalued and could be an attractive investment for both value and growth investors.
As the world’s population grows and ages, ConvaTec Group’s (LSE: CTEC) sales should only grow as the medical technology company expands to meet demand.
It produces therapies for the management of chronic conditions, wound care and critical care. Even though shares in the company only began trading at the end of October, they have since risen by 42% as investors have brought into the company’s growth story.
City analysts are expecting explosive growth in the years ahead. The company is projected to report a pre-tax profit of £316m for 2017, up from a pre-tax loss last year, and earnings per share are expected to grow by 54%. Next year earnings growth of 10% has been projected. If the company meets these forecasts, the shares are trading at a forward P/E of 21.6, which is slightly above that of peers such as Smith & Nephew plc. But if ConvaTec’s earnings continue to grow at a double-digit annual rate, the firm will soon grow into its valuation.
What’s more, City analysts have forecast the dividend payout of 5.5p this year, giving a dividend yield of 1.7%. The payout is covered nearly three times by earnings per share, giving plenty of room for further payout growth or special dividends as expansion continues.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.