Sonic Healthcare Limited : Neutral price, decent fundamentals

Sonic Healthcare Limited relative valuation is now NEUTRAL. It was previously rated UNDERVALUED, and has a fundamental analysis score of 63.

Our analysis is based on comparing Sonic Healthcare Limited with the following peers – Primary Health Care Limited, Capitol Health Limited, Resonance Health Ltd, ALS Ltd., Cryosite Limited, Genetic Technologies Limited, IM Medical Ltd, Miraca Holdings Inc. and KPJ Healthcare Bhd. (PRY-AU, CAJ-AU, RHT-AU, ALQ-AU, CTE-AU, GTG-AU, IMI-AU, 4544-JP and 5878-MY).

Relative Valuation

Sonic Healthcare Limited is currently neutrally valued, as its previous close of AUD 20.47 lies within the CapitalCube estimate range of AUD 19.29 to AUD 20.99. Over the last 52 week period, Sonic Healthcare Limited has fluctuated between AUD 16.50 and AUD 20.93.

Relative Valuation

Company Overview

  • Relative outperformance over the last year and the last month suggest a leading position.
  • Sonic Healthcare Limited’s current Price/Book of 2.56 is about median in its peer group.
  • SHL-AU‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • SHL-AU‘s relative asset efficiency and net profit margins are both around the median level.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • Over the last five years, SHL-AU‘s return on assets has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • SHL-AU‘s revenue growth in recent years and current PE ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • SHL-AU has additional debt capacity.

Investment Outlook

Sonic Healthcare Limited has a fundamental score of 63 and has a relative valuation of NEUTRAL.

Sonic Healthcare Limited’s price is very close to its implied price, thus not allowing for a specific classification into the Value – Price Matrix.

Fundamentals Vs Relative Valuation

Drivers of Valuation

The market seems to expect SHL-AU to maintain its relatively high returns.

SHL-AU‘s operating performance is higher than the median of its chosen peers (ROE of 12.13% compared to the peer median ROE of 9.83%) but the market does not seem to expect higher growth relative to peers (PE of 21.56 compared to peer median of 23.00) but simply to maintain its relatively high rates of return.

The company’s current Price/Book of 2.56 is about median in its peer group.

Valuation Drivers

SHL-AU has moved to a relatively high ROE from a median ROE and PE profile at the prior year-end.

ROE % (On Common Equity)
Price To Earnings

Peer Analysis

A complete list of valuation metrics is available on the company page.

Company Profile

Sonic Healthcare Ltd. engages in the provision of services in medical diagnostics and medical practices. It operates through the following segments: Pathology, Imaging and Other. The Pathology segment provides clinical laboratory services. The Imaging segment provides radiology and diagnostic imaging services. The Other segment includes the corporate office functions, medical centre operations and occupational health services, and other minor operations. The company was founded on September 25, 1934 and is headquartered in Sydney, Australia.


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