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What Should You Know About Sonic Healthcare Limited's (ASX:SHL) Future?

Simply Wall St

Looking at Sonic Healthcare Limited's (ASX:SHL) earnings update on 30 June 2019, it seems that analyst expectations are fairly bearish, with profits predicted to rise by 5.2% next year compared with the higher past 5-year average growth rate of 7.2%. Presently, with latest-twelve-month earnings at AU$550m, we should see this growing to AU$578m by 2020. Below is a brief commentary around Sonic Healthcare's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

Check out our latest analysis for Sonic Healthcare

Exciting times ahead?

The longer term expectations from the 8 analysts of SHL is tilted towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of SHL's earnings growth over these next few years.

ASX:SHL Past and Future Earnings, August 20th 2019

From the current net income level of AU$550m and the final forecast of AU$641m by 2022, the annual rate of growth for SHL’s earnings is 6.0%. EPS reaches A$1.35 in the final year of forecast compared to the current A$1.23 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 8.9% to 8.8% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Sonic Healthcare, there are three key aspects you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Sonic Healthcare worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Sonic Healthcare is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Sonic Healthcare? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.