Can Medibank Shares Double in 5 Years

Can Medibank Shares Double in 5 Years? We undertook some of our own estimates and tried to see where Medibank could be within five years. It is always difficult to predict into the future and so we used average annual returns over our forecast period. For example, we assumed Medibank grows revenue by around 6% annually over the next five years, grows its claims expense by 5% annually over the same period and sees a 1% annual fall in its management expense ratio. We assume investment income is steady at $100m and a 30% corporate tax rate is applied when determining earnings in 2020 - 5 years from now. The assumptions see our earnings base rise from around $258m to $740m and when applying a 15x price to earnings ratio, in line with most industrial businesses, the valuation we come up with is close to $4 per share. To read our full note published last week visit (VIEW LINK)