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Kick Off: CSL Limited v Sonic Healthcare Limited

Already leading the healthcare pool CSL Limited (ASX: CSL) is looking to secure top spot going into the finals of the ASX World Cup, with a win against Sonic Healthcare Limited (ASX: SHL). Sonic requires a victory to keep its finals hopes alive.

Pre-match commentary and stats

CSL owns the world’s biggest distribution network for blood plasma products. The company’s significant ongoing R&D ensures a steady supply of new medicines and it already has the distribution network to sell products, old and new, come rain, hail, or shine. The company returns capital to shareholders through buying back its own shares as well as a modest dividend.

Sonic Healthcare is a major provider of pathology and radiology services in Australia. However, almost half of its business comes from overseas; the company owns pathology practices in New Zealand, the United Kingdom, the USA, Germany, Switzerland, Belgium and Ireland.

CSL Sonic Healthcare
Market Capitalisation $31.82 billion $6.9 billion
Forecast FY 14 P/E ratio 21.7 17.8
Forecast FY 14 Yield 1.92% unfranked 3.9% partially franked
FY 2013 Cashflow Yield 4.22% 6.65%
Net interest cover 81.19 8.08

 Notes: Thompson Consensus Forecasts, based on last FY reports.

GAME ON

When it comes to price, neither team is overly dominant, as both are quite expensive. However, with a generous dividend yield of 3.9%, higher cashflow yield and a lower forecast P/E ratio, Sonic Healthcare has the edge.

Sonic CEO Dr Colin Goldschmidt uses his experience as a pathologist to streak past CSL defenders. He scores a goal in the bottom right corner, making it 1 – 0 to Sonic! 

When it comes to growth it is difficult to separate the teams. CSL’s dominance of its industry, access to blood supplies and distribution network virtually ensures the company will grow profits over the long term. Even more so than CSL, Sonic Healthcare will benefit from the ageing population, as elderly people get sick more easily. Many will need Sonic’s diagnostic services. With a market capitalisation of under $7 billion, it will be easier for Sonic to grow.

CSL’s extremely strong cashflows look threatening, and in the end its high and growing return on investment upsets Sonic defenders and new CEO Paul Perreault scores with a header.

The score is still locked at 1 – 1 at full time, putting an end to Sonic’s hopes of progressing.

It's no secret that Sonic and CSL have great growth prospects - and the market prices them accordingly. In comparison, this growing small-cap is relatively unknown.

Indeed, the share price of this growing company is still only about 5% above the price 2 directors paid quite recently. Better yet, the CEO owns over 15%! However, the share price is up over 5% in three weeks so discover this stock now, before it's too late.

The Motley Fool's top dividend stock for 2014 offers growing sales, accelerating profits and a grossed up dividend yield of 7%! Find out the name and code right now -- your copy of "The Motley Fool's Top Dividend Stock for 2014" is FREE. Simply click here!

Motley Fool contributor Claude Walker (@claudedwalker) does not own shares in any of  the companies mentioned in this article.

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