There are some really good S&P/ASX 200 Index (ASX: XJO) shares that could be good options to own for potential growth.
Some businesses have already reached a size where long-term compound growth is limited. However, there are a few ASX 200 shares that have very interesting growth prospects over the next year and beyond:
Sonic Healthcare Ltd (ASX: SHL)
Sonic Healthcare is one of the largest healthcare ASX 200 shares, with a market capitalisation of almost $17 billion according to the ASX.
The business is generating strong operating leverage in its laboratory division. The huge level of COVID-19 testing has been enabled by historical investments in people and infrastructure (expertise, equipment, facilities, IT, supply chain and so on). The business has conducted more than 18 million COVID-19 PCR tests performed in around 60 Sonic laboratories globally.
Thanks to the high level of COVID-19 testing, half-year revenue grew 33% to $4.4 billion and net profit after tax (NPAT) rose 166% to $678 million.
The USA and Germany in-particular saw high levels of growth. The US division generated 39% organic revenue growth, despite base revenue (excluding COVID testing) being down 8%. The second wave impact was significantly less than the first. Germany saw organic revenue growth of 58% – Sonic is the largest provider of COVID-19 PCR tests in Germany, in 30 laboratories nationwide.
Even the Australia division saw 26% organic revenue growth, despite Australia’s COVID-19 situation being much more controlled than in the northern hemisphere. Base business revenue growth was 5%.
The ASX 200 share said that it’s in a strong position for future growth, with demand for COVID-19 PCR testing to continue into the foreseeable future. Management said that the underlying strong healthcare growth drivers are unchanged. Sonic has leading market positions in Australia, Germany, USA, UK and Switzerland.
At the current Sonic Healthcare share price it’s valued at 14x FY21’s estimated earnings according to CommSec.
Brickworks Limited (ASX: BKW)
The diversified property and building products business is seeing a recovery for its business and continued growth for its property trust.
Brickworks said that the pandemic has resulted in increased consumer demand for lower density living and this is resulting in a shift towards detached housing from multi-residential alternatives. This is favourable for Austral Bricks and Bristle Roofing, due to the relatively high usage of bricks and roof tiles in detached houses.
The ASX 200 share has been pro-active throughout the pandemic to accelerate several initiatives and ensure the business emerges stronger. All of Brickworks’ major Australian divisions saw growth of its earnings before interest and tax (EBIT). It continues to invest in its manufacturing plants to ensure market leadership.
In America, Brickworks has made strong progress on key strategic priorities. Significant ‘plant rationalisation’ activities were also accelerated through the pandemic, with a total of 16 manufacturing plants transitioning to 10. There has been higher demand for single family housing across the country. There was a strong recovery of demand during March, with improved weather and increased optimism of a stimulus-led, post-pandemic recovery. The daily order intake is now at pre-pandemic levels. Long-term growth is anticipated, once conditions normalise.
There’s a lot of potential with its property trust, with development activity going on at an unprecedented scale. Completion of pre-committed facilities over the next two years will result in a significant uplift of rental income and asset value, according to Brickworks. The trend towards online shopping and demand for more sophisticated facilities will help drive growth.
At the current Brickworks share price, it offers a grossed-up dividend yield of 4.1%.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Brickworks. The Motley Fool Australia has recommended Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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