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Sonic Healthcare Limited's (ASX:SHL) Earnings Grew 16%, Did It Beat Long-Term Trend?

Simply Wall St

When Sonic Healthcare Limited's (ASX:SHL) announced its latest earnings (30 June 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Sonic Healthcare's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not SHL actually performed well. Below is a quick commentary on how I see SHL has performed.

See our latest analysis for Sonic Healthcare

Did SHL beat its long-term earnings growth trend and its industry?

SHL's trailing twelve-month earnings (from 30 June 2019) of AU$550m has jumped 16% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 7.2%, indicating the rate at which SHL is growing has accelerated. How has it been able to do this? Let's see if it is only owing to industry tailwinds, or if Sonic Healthcare has experienced some company-specific growth.

ASX:SHL Income Statement, October 24th 2019

In terms of returns from investment, Sonic Healthcare has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. However, its return on assets (ROA) of 6.4% exceeds the AU Healthcare industry of 5.0%, indicating Sonic Healthcare has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Sonic Healthcare’s debt level, has declined over the past 3 years from 10% to 9.4%.

What does this mean?

Sonic Healthcare's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Sonic Healthcare to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for SHL’s future growth? Take a look at our free research report of analyst consensus for SHL’s outlook.
  2. Financial Health: Are SHL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2019. This may not be consistent with full year annual report figures.

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.