Sonic Healthcare Limited (SHL) AI Stock Analysis

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Sonic Healthcare Limited

(Sydney:SHL)

Rating:70Outperform

Price Target:

AU$29.00

▲(9.31%Upside)

Sonic Healthcare Limited's robust financial performance and positive earnings call sentiment are the primary drivers of its stock score. Technical analysis suggests caution due to mixed signals, while valuation indicates a premium pricing. Overall, the stock shows solid growth potential tempered by some market challenges.

Sonic Healthcare Limited (SHL) vs. iShares MSCI Australia ETF (EWA)

Market Cap

AU$12.74B

Dividend Yield4.03%

Average Volume (3M)1.47M

Price to Earnings (P/E)23.3

Beta (1Y)0.83

Revenue Growth10.15%

EPS Growth6.20%

CountryAU

Employees42,000

SectorHealthcare

Sector Strength41

IndustryMedical - Diagnostics & Research

Share Statistics

EPS (TTM)0.49

Shares Outstanding480,403,960

10 Day Avg. Volume1,320,525

30 Day Avg. Volume1,471,677

Financial Highlights & Ratios

PEG Ratio4.25

Price to Book (P/B)1.57

Price to Sales (P/S)0.00

P/FCF Ratio15.63

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

AU$28.93

Price Target Upside9.05% Upside

Rating ConsensusHold

Number of Analyst Covering3

Sonic Healthcare Limited Business Overview & Revenue Model

Company DescriptionSonic Healthcare Limited offers medical diagnostic services to medical practitioners, hospitals, community health services, and their collective patients. The company provides laboratory medicine/pathology testing services, such as biochemistry, cytopathology, genetics, haematology, histopathology, immunoserology, microbiology, molecular pathology, prenatal testing, toxicology, and ancillary functions; and radiology services, including magnetic resonance imaging, computed tomography (CT), ultrasound, X-ray, mammography, nuclear medicine, PET CT, interventional procedures, and bone mineral densitometry. It also offers primary care medical services comprising general practice clinics, occupational health services, skin cancer clinics, after-hours general practice services, general practice IT solutions, and community-based healthcare services. The company operates in Australia, the United Kingdom, Ireland, the United States, Germany, Switzerland, New Zealand, Belgium, and internationally. Sonic Healthcare Limited was incorporated in 1934 and is headquartered in Sydney, Australia.

How the Company Makes MoneySonic Healthcare Limited generates revenue primarily through its diverse range of diagnostic and healthcare services. The company's main revenue streams include pathology and laboratory services, which account for the bulk of its earnings. These services cover a wide array of tests and diagnostics essential for patient care, ranging from routine blood tests to complex genetic analyses. Additionally, Sonic Healthcare derives income from radiology services, including imaging procedures such as X-rays, MRIs, and CT scans. The company also operates in the clinical services sector, providing specialized medical services to various healthcare entities. Key factors contributing to its revenue include long-term contracts with hospitals and healthcare institutions, strategic acquisitions to expand its service offerings, and maintaining high standards of quality and reliability in service delivery. Sonic Healthcare's strong market presence and reputation for excellence further bolster its financial performance.

Sonic Healthcare Limited Earnings Call Summary

Earnings Call Date:Feb 19, 2025

(Q2-2025)

% Change Since: -6.52%|

Next Earnings Date:Aug 21, 2025

Earnings Call Sentiment Positive

The earnings call reflects a positive outlook with significant revenue and profit growth, successful M&A activities bolstering future potential, and strong performances in several divisions. However, challenges in the US market, initial losses on a new UK contract, and ongoing labor cost management issues temper the overall sentiment.

Q2-2025 Updates

Positive Updates

Revenue and Profit Growth

Sonic Healthcare reported revenue of $4.669 billion, up 8% year-over-year. EBITDA increased by 12% to $827 million, and net profit rose 17% to $237 million.

Strong Cash Generation

The company generated strong operating cash flow of $620 million, which is up 37% on the prior period.

Margin Expansion

EBITDA margin increased by 60 basis points, and excluding recent acquisitions, the margin expansion was 90 basis points.

Successful M&A Activity

The acquisition of LADR in Germany, expected to add over AUD 80 million in EBITDA, and other acquisitions in Switzerland and Germany are on track with synergy initiatives.

Australian Pathology Division Performance

The division showed strong organic revenue growth of 9% and significant progress in genetics and private billing initiatives.

UK Growth and Contract Wins

The UK division reported 10% growth with notable contract wins, including Hertfordshire and West Essex, and a new hub lab in Watford.

Radiology Division Expansion

The division achieved organic revenue growth of 12% and is investing in AI solutions with plans to open new sites.

Negative Updates

US Market Challenges

Organic growth in the US was only 2% due to weaker performance in anatomical pathology and slower-than-expected benefits from the XiFin billing system.

Belgium Revenue Decline

Organic growth was negative at -1%, impacted by fee cuts despite indexation, although future growth is expected to be positive.

Labor Cost Challenges

While labor costs as a percentage of revenue reduced, there is still room for improvement, particularly in the US division.

HWE Contract Initial Losses

The Hertfordshire and West Essex contract will initially incur a loss of AUD 10 million, with profitability expected in FY 2026.

Company Guidance

During the Sonic Healthcare financial results call for the half year ending December 31, 2024, CEO Dr. Colin Goldschmidt highlighted several key metrics indicating the company's recovery and growth post-pandemic. Sonic's revenue increased by 8% to AUD 4.669 billion, with EBITDA up 12% to AUD 827 million. Net profit saw a 17% rise to AUD 237 million, and earnings per share grew by 15% to AUD 0.492. Organic revenue growth was strong at 6.1%, contributing to a 60-basis-point expansion in the EBITDA margin, which would have been 90 basis points excluding recent zero-margin acquisitions. Labor costs as a percentage of revenue decreased by 50 basis points, reflecting effective cost management. The company expects continued growth, bolstered by acquisitions like the LADR Group, anticipated to add over AUD 80 million in annual EBITDA. Additionally, a dividend of AUD 0.44 was declared, marking a 2.3% increase from the previous year.

Sonic Healthcare Limited Financial Statement Overview

Summary

Sonic Healthcare Limited demonstrates strong profitability and operational efficiency, with stable margins and effective management of equity. While there is a slight increase in leverage and a recent decline in free cash flow, the company remains financially robust with well-managed resources. Ongoing attention to leverage and cash flow generation will be key to sustaining long-term financial health.

Income Statement

Positive

Sonic Healthcare Limited shows a robust gross profit margin and stable net profit margins over the past years. Despite a moderate decline in revenue growth from 2022 to 2023, the company has managed to maintain strong EBIT and EBITDA margins, indicating operational efficiency and stability in its income-generating capabilities.

Balance Sheet

Positive

The company maintains a healthy debt-to-equity ratio, though it has increased recently, which could indicate higher leverage risk. Return on Equity (ROE) remains strong, demonstrating effective use of equity capital. The equity ratio shows a solid level of equity financing, contributing to financial stability.

Cash Flow

Positive

Operating cash flow remains strong, yet there has been a significant decline in free cash flow year-over-year. The company has a solid operating cash flow to net income ratio, suggesting efficient cash conversion from profits. However, the drop in free cash flow growth might indicate increased capital expenditures or reduced cash generation.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
9.33B	8.93B	7.96B	9.31B	9.13B	6.56B
	Gross Profit
3.08B	2.33B	2.11B	3.41B	3.51B	1.67B
	EBIT
2.83B	816.45M	820.33M	2.14B	2.29B	540.48M
	EBITDA
1.75B	1.66B	1.72B	2.83B	2.56B	1.42B
	Net Income Common Stockholders
545.47M	511.09M	684.98M	1.46B	1.32B	527.75M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
619.61M	645.00M	797.99M	780.00M	899.83M	1.23B
	Total Assets
13.77B	14.83B	13.56B	13.11B	12.27B	12.63B
	Total Debt
3.99B	4.52B	3.10B	3.01B	3.23B	4.62B
	Net Debt
3.37B	3.87B	2.30B	2.23B	2.33B	3.39B
	Total Liabilities
5.87B	6.75B	5.64B	5.68B	5.77B	6.97B
	Stockholders Equity
7.71B	7.92B	7.74B	7.27B	6.38B	5.57B
Cash Flow		Free Cash Flow
823.59M	492.01M	974.02M	1.85B	1.68B	1.03B
	Operating Cash Flow
1.24B	1.07B	1.47B	2.23B	2.04B	1.36B
	Investing Cash Flow
-886.31M	-1.81B	-580.04M	-989.18M	-386.75M	-334.92M
	Financing Cash Flow
-464.85M	592.41M	-911.51M	-1.35B	-1.95B	-536.74M

Sonic Healthcare Limited Technical Analysis

Technical Analysis Sentiment

Positive

Last Price26.53

Price Trends

50DMA

26.01

Positive

100DMA

26.65

Negative

200DMA

26.80

Negative

Market Momentum

MACD

0.14

Positive

RSI

54.11

Neutral

STOCH

62.90

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AU:SHL, the sentiment is Positive. The current price of 26.53 is above the 20-day moving average (MA) of 26.51, above the 50-day MA of 26.01, and below the 200-day MA of 26.80, indicating a neutral trend. The MACD of 0.14 indicates Positive momentum. The RSI at 54.11 is Neutral, neither overbought nor oversold. The STOCH value of 62.90 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AU:SHL.

Sonic Healthcare Limited Peers Comparison

Overall Rating

UnderperformOutperform

Sector (53)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SHL	70 Outperform	AU$12.74B	23.29	6.86%	4.03%	10.15%	6.20%
RHC	55 Neutral	$8.68B	1,061.80	0.52%	2.40%	7.25%	-99.04%
Sector *	53 Neutral	$5.23B	3.23	-44.27%	2.82%	16.82%	0.11%
IDX	51 Neutral	AU$908.73M	100.41	1.14%	2.38%	7.83%	―
HLS	50 Neutral	€628.10M	―	-4.46%	―	-7.82%	98.08%
SOM	50 Neutral	AU$127.50M	―	-15.86%	―	12.93%	62.47%
MVP	44 Neutral	AU$75.48M	―	-45.40%	―	13.61%	-55.12%

* Healthcare Sector Average

Performance Comparison

AU:SHL

Sonic Healthcare Limited

26.60

2.82

11.86%

AU:HLS

Healius Limited

0.87

-0.14

-13.52%

AU:RHC

Ramsay Health Care

38.40

-9.75

-20.24%

AU:SOM

Somnomed Limited

0.59

0.33

126.92%

AU:MVP

Medical Developments International Limited

0.62

0.19

44.19%

AU:IDX

Integral Diagnostics Ltd.

2.39

>-0.01

-0.42%

Sonic Healthcare Limited Corporate Events

Sonic Healthcare Director Increases Shareholding

Apr 11, 2025

Sonic Healthcare Limited announced a change in the interest of its director, Christine Bennett, who acquired an additional 1,000 fully paid ordinary shares in the company, bringing her total to 7,100 shares. This on-market purchase reflects a continued confidence in the company’s performance and could signal positive sentiment to stakeholders regarding the company’s future prospects.

Sonic Healthcare Director Increases Shareholding

Apr 8, 2025

Sonic Healthcare Limited announced a change in the director’s interest, with Katharine Giles acquiring 850 additional fully paid ordinary shares, bringing her total to 3,600 shares. This on-market purchase reflects confidence in the company’s future prospects and may influence stakeholder perceptions positively.

Sonic Healthcare Director Increases Shareholding

Mar 26, 2025

Sonic Healthcare Limited announced a change in the director’s interest, with Nicola Wakefield Evans acquiring an additional 2,000 fully paid ordinary shares, bringing her total to 4,000 shares. This on-market purchase reflects increased confidence in the company’s prospects and may positively impact stakeholder perception of the company’s stability and growth potential.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.