Is NMC Health plc the best healthcare stock in the Footsie?

When we talk about FTSE 100 healthcare stocks, the two largest pharmaceutical stocks in the index - GlaxoSmithKline and AstraZeneca - often come to mind. However, currently, there are actually six healthcare stocks in the index, and several of these companies offer exciting growth prospects.

Today, I'm analysing one of the lesser-known FTSE 100 healthcare stocks: NMC Health(LSE: NMC). Let's take a closer look at the company and compare it to its larger healthcare rivals.

Prolific growth

NMC Health is the United Arab Emirates' largest healthcare provider. The company owns and manages over 135 healthcare facilities that include hospitals, medical centres, long-term care facilities, day surgery centres and fertility centres, and has a team of over 2,000 doctors and 18,000 paramedical and support personnel. Every year, over 8.5m people across countries such as United Arab Emirates, Saudi Arabia, Kuwait are treated by NMC doctors.

The healthcare provider's growth has been quite prolific in recent years. Indeed, between 2011 and 2016, its top line surged from $444m to $1,221m, with net profit in that time climbing from $43m to $151m. Unsurprisingly, its share price trajectory has also been upwards, with the stock rising almost 50% since I last covered it 10 months ago.

Can NMC's share price continue to surge higher going forward? Let's look at today's FY2017 full-year results for a clue.

FY2017 results

Today's numbers suggest the company still has plenty of momentum. For the year ended 31 December, revenue climbed 31.3%, including organic growth of 15.6%, with net profit climbing 38.2% to $209.2m. Adjusted earnings per share rose 32.7% to $1.036.

Chief Executive Prasanth Manghat was upbeat about NMC's future prospects, commenting: "We see 2017 as setting the stage for many more years of growth for the Company and we begin 2018 with confidence. Sustained ramp-up of utilization at facilities we opened in recent years, integration of acquired assets and continued discipline in organic and inorganic expansions should all translate into a very promising 2018 and beyond."

Worth buying?

It's clear to me that NMC Health has strong momentum at present. The stock has been the best performing healthcare stock in the FTSE 100 over the last year by a country mile. Yet the shares are down around 4% in early trade and they have now fallen around 8% since late February. So, is now the time to buy?

City analysts currently forecast an earnings figure of $1.47 for this year. That means that at the current share price, the stock is trading on a forward-looking P/E of 30.2. That's quite a pricey valuation, especially in contract to healthcare rivals GlaxoSmithKline and AstraZeneca, which trade on multiples of 12.3 and 19.3 respectively. NMC also offers a much lower yield than these two rivals, currently sporting a yield of 0.4%, compared to 6.1% for Glaxo and 4.1% for Astra.

Having said that, you can't deny that NMC is generating impressive growth at present. Its shares have risen around 80% over the last year, compared to a fall of 20% for GSK and an underwhelming rise of 0.4% for AZN. Therefore, to my mind, the stock warrants a premium valuation. I believe it's worth keeping a close eye on NMC, with a view to buying on further price weakness.

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Edward Sheldon owns shares in GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. 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.

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