What is Happening to the Share Price of Medibank Private Ltd?

What does Medibank Private Ltd do?

Medibank Private Ltd [ASX:MPL] is Australia’s largest private health insurer with 29% market share, representing 3.8 million people.

What’s happening to the MPL share price?

The share price has been in a strong uptrend since mid-January this year.

The company released their half-year results on 19 February. They were positive in the main.

Health insurance operating profit increased to $271.7 million, up from $171.1 million the prior year.

Improvement in profit has been attributed to the ongoing crackdown on improper claims. One of the major costs for the government is healthcare; as a result, the government is coming down hard on wasteful procedures. Health Minister Sussan Ley has four separate reviews underway to reform the health system, easing the burden on the Federal budget.

This is containing claims growth, while adding to the bottom line.

In saying that, it wasn’t all good news for MPL. The half-year report also shined a light on some concerns for Medibank. There was a decline in the number of policyholders, reflecting problems in maintaining market share, in addition to slowing growth in attracting new customers.

What now for MPL shares?

There was a lot of uncertainty surrounding private health insurance last month when, according to a Galaxy Poll commissioned by health fund comparison website iSelect, research suggested that more than half a million Australians would dump their private health cover in response to the increase in premiums.

This was bearish news for the sector.

This is where some basic chart reading can be helpful. When you come across such headlines, relate it back to the chart.

The chart of the Medibank share price had already formed two higher lows prior to the bearish news. This suggested better news to come for Medibank, despite the headlines that Australians would quit private cover in droves.

In response to that survey in late March, the share price of Medibank has continued to make a higher bottom and run higher.

Medibank has been working with hospitals and other providers to reduce waste and inefficiency. This work is perhaps beginning to bear fruit, as the company keeps claims costs down.

Until the chart says otherwise, the fundamentals for Medibank look okay for the immediate future.

If you want to know how to read the prospects of individual company’s through the charts, go here to find out more.

Terence Duffy,
Research Analyst, Cycles, Trends and Forecasts

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Terence Duffy is an analyst and chartist, specialising in researching economic trends and cycles.  His primary focus is housing and land affordability. But you can also depend on him to offer his unique analysis of stock market charts. As Terence will show you, the charts often forecast, well in advance, the good or bad news to come — which he details in Cycles, Trends and Forecasts.

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