The Sonic Healthcare Limited (ASX: SHL) share price has dropped since the release of the FY20 report.
FY20 result
Sonic reported a decent set of numbers in FY20.
The healthcare business said that underlying revenue rose by 11.5% to $6.8 billion and underlying net profit grew by 6.5% to $552 million. The underlying EBITDA (click here to learn what EBITDA means) generated was $1.11 billion, better than the $1.075 billion it said in a recent trading update.
Sonic said that it’s playing a key role in combating the COVID-19 pandemic in its markets whilst continuing to provide essential routine healthcare services.
The final dividend was maintained at $0.51 per share, meaning the total dividend was up 1.2% to $0.85 per share.
However, the market didn’t seem to love the report as the share price has fallen by 8% since its release.
What about FY21?
Sonic Healthcare said that its base business volumes had largely recovered by 30 June 2020. Since the end of FY20, the company said that revenue growth rates have been “substantially higher than usual, boding well for the 2021 year”. However, it is uncertain how long these growth rates will continue.
The Sonic share price has recovered strongly since the COVID-19 crash. Despite the recent decline it’s actually still higher than the pre-COVID-19 price.
For long term investors, Sonic has been among the best blue chip ASX growth shares. Low interest rates go some way to justify today’s valuation. However, it’s too expensive for me.
I like the global diversification offered by Sonic – it generates earnings across Europe, North America and Australia. However, it’s hard to say what the long term earnings growth rate will be. It’s already a $15 billion business. I think bigger businesses are naturally going to have slower growth rates than smaller ones.
There are other ASX growth shares I would prefer to buy such as Pushpay Holdings Ltd (ASX: PPH) which benefits as a software provider. Consumer business Bubs Australia Ltd (ASX: BUB) is a high risk, potentially high reward business that could make big returns too.
