This boring FTSE 250 stock has an incredible earnings forecast!

This FTSE 250 stock has moved sideways for years. It certainly hasn’t rewarded shareholders. However, things could change in the coming years.

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I actually used to own shares in FTSE 250 private hospital operator Spire Healthcare (LSE:SPI). However, the stock moved sideways for some time and I eventually lost patience.

However, I revisited the stock recently and noticed… the share price is still going sideways! Nonetheless, it does look like a more interesting prospect to consider today purely because of its incredible earnings forecast.

Created with Highcharts 11.4.3Spire Healthcare Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Big earnings potential

Spire Healthcare is currently trading at 34.3 times earnings for the last reported year, 2023. However, the company’s earnings for 2024 — to be released in March — are set to be around 50% higher than the previous year. This trend continues throughout the forecasting period through to 2026. As such, the company would now be trading at 23.3 times forward earnings, and then 15.6 times earnings for 2025 and 11.3 times projected earnings for 2026.

Should you invest £1,000 in Spire Healthcare right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Spire Healthcare made the list?

See the 6 stocks

This will be driven, according to analysts, by surging revenues, which jump from £1.3bn in 2023 to £1.7bn in 2026. In the meantime, the business is expected to maintain control over costs and reduce debt. What’s more, the dividend yield is also expected to expand, reaching 2.25% by 2026, based on the current stock price. All of this is very encouraging.

Why is this happening?

Spire Healthcare is poised for strong performance due to several key factors. The company has seen significant growth in private revenue, driven by a surge in private medical insurance adoption among working-age individuals. This trend is particularly strong in corporate sectors, leading to increased outpatient activity and higher-margin inpatient treatments.

Additionally, Spire’s partnerships with the NHS have expanded, with rising revenue supported by higher commissioning volumes and patients choosing Spire facilities to reduce waiting times. Its NHS revenue increased 5.2% in H1 of 2024.

Operationally, it has implemented a £15m efficiency programme, focusing on digitalisation, automation, and process improvements. This initiative aims to boost hospital EBITDA margins beyond 21% by 2027. The company’s financial performance reflects these efforts, with adjusted EBITDA increasing by 10.8% in the first half of 2024, driven by improved hospital margins and optimised pricing strategies.

An opportunity worth considering

Of course, many UK investors will be put off by the current earnings multiple. After all, if Spire fails to deliver on its promised growth, the stock could fall. In fact, the March results really could be a make or break moment for the business. Expensive stocks that don’t meet earnings targets can slump.

Moreover, investors should weigh whether the business is becoming overly reliant on the NHS and consider whether labour shortages could negatively impact both the top and bottom line. It’s also worth noting that debt is relatively high compared to earnings, although the company is relatively asset rich.

However, the broader trends are very much in the company’s favour. The population is ageing, fewer of us trust the NHS and are taking private healthcare options, and Labour may be more inclined to invest in reducing NHS waiting lists. This is also reflected in the stock’s average price target of £3.07, which is 34% higher than the current price. All eight analysts covering the stock have a positive rating.

Should you invest £1,000 in Spire Healthcare right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Spire Healthcare made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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