SHL share price in focus
Sonic Healthcare, listed in April 1987, has grown into one of the world’s largest pathology businesses, with operations spanning Australia, New Zealand, Europe, and North America.
The company provides a wide range of services, including laboratory medicine, pathology, diagnostic imaging, radiology, general practice medicine, and corporate medical services.
Sonic Healthcare is committed to prioritizing the needs of doctors and their patients, striving for medical excellence while fostering a supportive and desirable workplace.
The key metrics
For investors, SHL’s revenue, gross margin, and profit can provide valuable insights into the company’s performance.
SHL last reported an annual revenue of $8,967m with a compound annual growth rate (CAGR) over the last 3 years of 0.8% per year. While the absolute number is useful to know, the key point is the trend. We want to see a consistent, upward trajectory in revenue.
Gross margin measures profitability before taking into account overhead costs – it reflects the strength of the company’s core business operations. SHL’s latest reported gross margin stood at 32.8%.
Finally, the number we’re most interested in – profit. Last financial year Sonic Healthcare Ltd reported a profit of $511m. Three years ago they made a profit of $1,315m, representing a CAGR of -27.0%.
Financial health of SHL shares
Profitability is important, but equally important is the capital health of the company. We want to know about the company’s leverage, their capacity to pay debts, and their ability to generate a return on assets. One measure we can look at is net debt. This is simply the total debt minus the company’s cash holdings.
Sonic Healthcare Ltd’s net debt currently sits at $3,871m. Higher debt levels can increase sensitivity to interest rate changes and economic cycles.
Another figure we can look at is the debt/equity percentage. This tells us how much debt the company has relative to shareholder equity – this is also known as leverage. SHL has more equity than debt, with a debt/equity ratio of 55.9%.
Finally, we can look at the return on equity (ROE). The ROE tells us how efficiently the company is turning shareholder equity into profit – high numbers indicate the company is generating a lot of value for investors, while a low number raises concerns that capital isn’t necessarily being allocated efficiently. SHL generated an ROE of 6.8% in FY24.
What to make of SHL shares?
With profit trending downwards, low revenue growth, and low return on equity, SHL doesn’t look like the most inspiring pick, but it could still be worth digging deeper to understand their current situation and identify opportunities.
Please keep in mind this should only be the beginning of your research. It’s important to get a good grasp of the company’s financials and compare it to its peers. It’s also important to make sure the company is priced fairly. To learn more about share price valuation, you can sign up for one of our many free online investing courses.
