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£1,000 to invest? I’d buy this FTSE 250 income stock, but approach another with caution

Private hospital group Mediclinic International (LSE: MDC) has had a rough time since listing on the London market in 2016.

In poor health

It was briefly a constituent of the FTSE 100, but with its share price down 60% in the last three years, it now languishes in the FTSE 250 with a market-cap of £2.7bn.

The Mediclinic share price is up 2% today after markets smiled on its 2020 half-year trading update. Group CEO Dr Ronnie van der Merwe reported an encouraging performance with trading in line with expectations, as it expands across all three of its divisions.

He also highlighted good revenue growth, broadly stable margins in Switzerland, patient volumes in line with expectations at Mediclinic Southern Africa, and “continued gradual improvement” in the Abu Dhabi business.

Road to recovery

The group’s problems were down to impairment charges totalling £262m on its UK and Swiss businesses, which struggled with government regulation and increased competition, even as its South African and Middle East operations reported steady revenue growth. Yet private healthcare is a relatively defensive market and investors have been looking for an opportunity to buy back into the growth story.

Given its troubles, I would have expected the Mediclinic share price to be trading at a wider discount and just 13.5 times forecast earnings. The forecast yield is just 2.1%, although nicely covered 3.4 times, giving scope for growth. Earnings are predicted to fall 4% this year, but the future looks brighter as City analysts reckon they could climb 11% next year.

It is well worth keeping an eye on Mediclinic, but I wouldn’t rush to buy it today. Especially when there are so many exciting stocks on the FTSE 250 at the moment, including this little gem picked it by my fellow Fool writer Alan Oscroft, which also operates in the healthcare sector.

In rude health

Earlier this month, Alan wrote that Primary Health Properties (LSE: PHP) offers a tempting combination of strong share price growth and high dividends. The growth has been eye-popping, up 30% in the last year, and almost 70% over years.

The £1.67bn company invests in healthcare real estate in the UK and Ireland, which it lets out on long-term leases backed by a secure underlying covenant, with the majority of rental income funded either directly or indirectly by a government body.

The primary healthcare real estate sector is typically less cyclical than other parts of the property market, which makes Primary Health Properties surprisingly low risk, given recent soaraway growth. I can see why Alan admires it.

Low risk, high price

Last month, it launched a share placing to raise £75m to fund further expansion, as it sees attractive investment opportunities in building larger GP primary care centres. This is on top of the £60m it has already committed to fund the acquisition and development of eight medical centres, and £70m on other medical centres as it looks to boost the number of assets in its portfolio.

Today, it offers an attractive forward yield of 4%. Earnings growth looks steady at a forecast 10% this year, and 7% next. There is one downside, though. Alan isn’t the first to spot an opportunity here. The stock is a little pricey at 23.7 times earnings. Sometimes you have to pay for quality…

A Growth Gem

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Primary Health Properties. 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.