Health Sector (PE Average Higher than others)?

[michael_selway]

Hi ive always wondered why the Health Sector has a PE Average higher than any other sectors? Has it always been the case or is it just a coincidence? Currently on Comsec PE is 23+. Is there a reason for it? Is it justified?

Thanks

MS

http://www.aireview.com/index.php?act=view&catid=8&id=3327

 

[Ann]

Hello Michael,

At a couple of investor briefings I have attended recently, the analysts have been saying there is still a lot of upside potential for quality healthcare stocks. As future potential earnings are being built into the price of these stocks you will probably see a higher P/E ratio than average. It is basically an indication as to their future potential.

They suggest even in a downturn their business is insulated as well as the ageing population requiring more health care poducts and services.

Hope that helps to explain it a wee bit.

Ann

PS This is a chart of the sector plus the constituents that comprise the sector.....

ANN Ansell Limited
VCR Ventracor Limited
SYB Symbion Health Limited
SIP Sigma Pharmaceuticals Ltd
SHL Sonic Healthcare Limited
RMD ResMed Inc.
RHC Ramsay Health Care Limited
PTD Peptech Limited
HSP Healthscope Limited
DVC DCA Group Limited
API Australian Pharmaceutical Industries Limited
NRT Novogen Limited
MYP Mayne Pharma Ltd
CSL CSL Limited
COH Cochlear Limited

 

[RodC]

Health Sector is taking a hit today.

HSP has downgraded their earnings forecast and are down 18% at the moment.

RHC are also down 3.8%

Rod.

 

[michael_selway]

Health Sector is taking a hit today.

HSP has downgraded their earnings forecast and are down 18% at the moment.

RHC are also down 3.8%

Rod.

Hi do u know what their forecast was and how much its been downgraded by actually?

Thanks

MS

 

[RodC]

Apparently analysts were forecasting profit of around $65 million, HSP have now said that it's only likely to be around $50 million.

Rod.

 

[michael_selway]

Apparently analysts were forecasting profit of around $65 million, HSP have now said that it's only likely to be around $50 million.

Rod.

Yeah, they appear to have recovered/stabalised a bit now, hopefully good news from here on in.

Ann yeah Health Sector have done well these last few years, but HSPs fall effect must have given that index a bit of a hit.

 

[Ann]

Hi Michael,

Yes there has been a bit of a retrace recently. If I am correct and this is a Head & Shoulders forming, there may be further retraces in the XHJ yet to come......

 

[wayneL]

Hi Michael,

Yes there has been a bit of a retrace recently. If I am correct and this is a Head & Shoulders forming, there may be further retraces in the XHJ yet to come......

Nice MACD divergence also.

 

[DRUGGIST]

Any thoughts on why Sigma Pharmaceuticals SIP have gone into the doldrums post Arrow merger. It all seemed positive to me for both companies.

 

[Julia]

Any thoughts on why Sigma Pharmaceuticals SIP have gone into the doldrums post Arrow merger. It all seemed positive to me for both companies.

Hello Druggist,

I think there is some question about alterations to the PBS listings being considered at present. If some brand name pharmaceuticals were to be dropped off the list in favour of generics, or even if they were to have a part charge attached, that can significantly disadvantage a manufacturer.
I'm not really sure of the balance between original and generic brands in the combined company.

Also there is no broker as far as I know at present with a Buy on SIP. Plenty of holds and one Sell.

Julia

 

[DRUGGIST]

Thanks Julia,

I guess my point is that SIP is now Australia's largest Generic manufacturer, as well as largest wholesaler.

 

[adobee]

Alot of the health care stocks have stayed responable stable through the latest shudder in stock prices. RMD must we one of the few stocks that has gone up.. With results due out tomorrow we will see if it can maintain the upswing.

 

[billhill]

Hi ive always wondered why the Health Sector has a PE Average higher than any other sectors? Has it always been the case or is it just a coincidence? Currently on Comsec PE is 23+. Is there a reason for it? Is it justified?

I noticed no one really answered your question regarding the higher PE ratios of healthcare stocks then other sectors. This is a lasting phenomonem meaning that healthcare will usually alway have a higher average PE then the market as a whole. The reason for this is that healthcare is seen as an extremely safe, non cyclical and defensive sector. Healthcare relies on the principle that people will get sick. This is a reliable and stable occurance thus unlike other sectors a downturn in the ecconomy will not likely result in difficulties in making money. It also helps that the healthcare sectors is strongly backed by governments. These are the reasons why the sector trades at a premium. So if you are looking for value in healthcare stock compare a stocks PE to the healthcare average PE and not the market PE.

Cheers

 

[Wysiwyg]

Re: Health Sector

A viewer posted on another thread about exploiting the elderly and investing in Health Care stocks. This chart shows a pattern of head and shoulders (red oblong) which suggests an end of trend. The Index is at a decision point now where the 4-5 year uptrend (white line) has been hit and price is in support/resistance (blue lines) levels. I would suggest trend line and support being broken as the end of trend.

Of course anyone knowing the future direction should pile in now and make their fortune.


Weekly

 

[PharmBBs]

Thanks Julia,

I guess my point is that SIP is now Australia's largest Generic manufacturer, as well as largest wholesaler.

That's why I bought them the other day.

Demand for generics (esp painkillers) is only going to increase imo.

A viewer posted on another thread about exploiting the elderly and investing in Health Care stocks.

Would that be me? XD


Anyway, my guess is that the recent drops are mostly due to exposure to other sectors (or just low confidence in the market in general). But tbh I don't actually know. Am curious to hear others' thoughts.

I'm not too worried about price movements tbh. I'm buying for 20+ years of dividends. Possibly longer if the trend of increasing life expectancy and decreasing birth rate continues. As long as the companies don't go bust and the dividends keep coming, I'm happy.