Medical needs are non-discretionary and investors might view them as safe companies to invest in. However, it appears that investors are placing too much hope in the prices of their security, as you can see, there are companies that are being sold at more than 30 PE. The most outrageous of them belongs to HC Surgical Specialists Limited, a company currently focusing on colonoscopy procedures, with a PE of 52 (Google Finance says it is 62, well... it is expensive, nevertheless).
This company is less than a year old in the Catalist (secondary board) market, having reported its mid-year earnings on the 3-Jan. A declared dividend of 1.8 cents gives investors a 3.3% yield based on the current price of $0.55
One can dissect its earnings as much as one insist on, but a year of earnings, in Graham's words, "should not be taken seriously." The company did pledge to give away 70% of its earnings as dividends, which is highly unusual since the PE is high (reflective of investors' view on its future growth).
What is puzzling to me is that the company planned to put aside 2.8M of its raised capital on acquisition, and about half of that is spent on its very first acquired company-- it has not even started operation. Among the key reasons stated for acquiring this company (or human resource) is that Dr Julian has a potentially worthwhile network and also credible prior job experience. I leave this qualitative justification to insiders but I seriously doubt anyone can have a huge network given 5.5 years of experience.
Investing in growth is fine if you are an insider to the industry, but be cautious of this one. Few medical professionals (in which its entire non-independent and executive board members, are) make excellent businessmen.
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