Investors are reacting positively to Ryman Healthcare's announcement it will be upping its build rate to reflect the aging demographics - but at least one analyst believes the stock is overvalued.
The aged-care and retirement village operator's shares rose to as high as $8.75 last week, from a close on the previous Friday of $8.38.
It was a favourable response to Ryman's announcement it would increase its domestic build rate to 850 units and beds a year by 2017, meaning it will be building at almost double what it was five years ago.
It also announced securing a second retirement village site in Melbourne was a priority.
But Morningstar senior analyst Nachi Moghe said he believed the market was over-estimating Ryman's long-term growth rate.
"The stock price is overvalued and I think people are enamoured with the growth outlook of the business," Mr Moghe said.
"Also the fact that the initial response to the second village in Melbourne has been quite positive, and the company has started looking for another site in Melbourne, so that has got the market excited as well."
However, the company had not increased its medium-term earnings guide from about 15 percent, which was what Morningstar was predicting, he said.