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One FTSE 250 stock I think it looks like an exciting opportunity. healthcare needle (LSE: SPI).
Here's why you'd be willing to buy some stocks the next time you have some cash to invest.
Private medical assistance
Spire is a private healthcare company with 40 private hospitals and eight clinics. The company serves those with private health insurance, as well as others willing to pay a one-time fee for private health care. Interestingly, it also helps the NHS with some services, as the troubled state-backed provider continues to struggle with delays.
Spire stock has been rising in recent years. Over a 12 month period they have risen 11% from 215p last year to current levels of 239p. Going back even further, it's hard to ignore an impressive 75% rise from 136p to current levels.
My investment case
The current state of the NHS is where I believe further growth is at stake. Waiting lists are only increasing and many are turning to the private sector for help (at least those who can).
Plus, with limited resources, the NHS is already turning to providers like Spire to lend a hand. As the population grows and ages, this dependency could also grow. Both aspects could help boost Spire's performance and profitability.
There are two issues that concern me about Spire. One is the debt levels on its balance sheet. They are probably a little higher than I would like and this is worrying. Sometimes debt repayment can take priority over profitability and can also harm investor confidence.
The other issue I have is that an overhaul of the NHS could mean the government could end the outsourcing of operations to private companies. Today, Spire's NHS revenues are growing successfully and contributing to the company's growth. If this were to end, performance and profitability could suffer.
Returning to the bullish picture, I don't see the NHS changing radically overnight. Such an effort can take years, if not decades, especially in the current economic climate. Spire's recent results have only shown growth in performance and I am confident this trend will continue.
Next, Spire stock offers a small dividend yield of just under 1%. I can see this level of profitability increasing if performance continues on an upward trajectory. Although I understand that dividends are never guaranteed.
Finally, according to analyst forecasts, the stock looks cheap with a future price/earnings growth ratio of 0.8. Any reading below one may indicate that a stock is undervalued. However, I understand that forecasts are not always met.
Final thoughts
I only see the NHS's dependence on private companies and people looking to turn to the private sector for medical treatment increasing in the coming years. In my opinion, this could benefit Spire.
Overall, strong growth prospects, attractive valuation and potentially growing returns help my investment case.
