Netcare Limited (JSE: NTC), a leading South African private healthcare provider, has experienced an 18% decline in its share price year-to-date, extending a two-year trend. However, a closer look at their recent financial results reveals a company adept at navigating challenges.
Despite facing lower patient volumes, Netcare reported a solid performance for the first half of 2024 (H1 2024). Revenue grew 4.3% to reach R12 billion, and strong operational efficiency led to a 7.5% increase in profitability (EBITDA). This translated to a healthier bottom line, with earnings per share rising 5.8%. Notably, Netcare also boasted an improved return on invested capital (ROIC) of 10.9%, demonstrating the effective use of shareholder funds. To reward investors for their continued support, the company declared an interim dividend of 30 cents per share.
Netcare’s success hinges on two key strategies: maximizing revenue per patient and controlling costs. In H1 2024, they achieved a 5.7% increase in revenue per patient, indicating their ability to adapt to changing market dynamics. So, while patient volumes dipped, Netcare’s focus on efficiency ensured financial stability. This begs the question: can Netcare sustain this impressive performance? With a focus on innovation and operational excellence, Netcare appears well-positioned to weather short-term headwinds and deliver long-term value for investors.
Technical
Netcare is currently trading in a pronounced downtrend, positioned below its 100-day moving average. Recently, trading volumes began to wane, suggesting a potential shift in market dynamics. The share price traded in oversold Relative Strength Index (RSI) conditions, leading to a period of sideways consolidation within a rectangle pattern, indicating market indecision. This pattern is defined by resistance at R12.00 per share and support at R11.03 per share.
Given Netcare’s upbeat earnings results, a breakout above the R12.00 resistance level could signal renewed buying interest, potentially leading to further gains. In such a scenario, the 100-day moving average could serve as a key point of interest for traders targeting the upside. Conversely, if bearish sentiment prevails, the support level at R11.03 per share could be retested, highlighting the importance of this level in maintaining the stock’s stability.
Summary
Netcare’s robust performance amidst lower volumes and market challenges highlights its operational excellence. With revenue up 4.3%, EBITDA growth of 7.5%, and improved ROIC at 10.9%, a breakout above the R12.00 resistance could signal further gains. Conversely, support at R11.03 remains critical if bearish sentiment persists.
Sources: Netcare Limited, Reuters
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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