The Sonic Healthcare Limited (ASX: SHL) share price could be a leading opportunity right now, in my opinion.
Sonic Healthcare is one of the leading global pathology businesses, with operations in Australia, New Zealand, North America, and Europe.
Since the start of 2022, the Sonic Healthcare share price has dropped back by 27%. I think the business looks good value with what's going on in the healthcare space.
Third wave of Omicron to lead to more testing?
Over the past two and a half years, COVID testing has helped the company's revenue and net profit after tax (NPAT) significantly.
According to Sonic's FY22 half-year result, its revenue increased 7% year over year to $4.76 billion. Net profit went up 22% to $828 million. But, the base revenue (which excludes COVID revenue) increased 4.3% year over year.
Over the FY22 first half, the Sonic Healthcare share price increased by 22.5%.
Sonic management is expecting ongoing growth of the base business, with "strong underlying drivers, including catch-up of testing postponed through pandemic".
COVID-19 cases are now increasing, as are hospitalisations, as a third wave of Omicron sweeps across Australia.
The federal chief health officer, Paul Kelly, has warned this is the "start of this wave, not the end", according to reporting by The Guardian.
Calls to get a PCR test despite a negative RAT
Concession card holders will now have continued access to free RAT tests through their local pharmacies. The program has been extended until 31 July.
Australian Medical Association vice president Dr Chris Moy said people who return a negative RAT test but continue to experience symptoms should have a PCR test.
Moy told ABC Radio Sydney:
A positive is a positive. The issue is you can't rely on a negative if you continue to have symptoms… By the time [a RAT] may go positive, it may be too late to get these antivirals.
We need you to go out there straight away, get a PCR test. If you're positive then we can get the ball rolling to give you these potentially life-saving treatments.
I think these different factors could lead to a resurgence of PCR testing, which would be a boost for Sonic's earnings and therefore, potentially, the Sonic Healthcare share price.
Even after this wave, I think Sonic's previous comments about expectations of ongoing COVID testing are almost as relevant now as they were with the FY22 half-year result:
[We] expect a sustainable level of COVID testing into the future, including routine COVID testing, screening programs, variant testing, whole genome sequencing, antibody tests.
Profit can be used to boost shareholder returns
I like that Sonic Healthcare has been using some of its elevated cash flow to make acquisitions to boost long-term growth.
For example, over the past 12 months it has bought ProPath in Dallas. ProPath makes US$110 million in revenue. It's also bought Canberra Imaging Group in Australia, which makes $60 million in revenue.
It could continue to make earnings-boosting acquisitions, too.
Sonic Healthcare has a progressive dividend policy. It has also launched a $500 million on-market share buyback.
Foolish takeaway
I think that the Sonic Healthcare share price is attractive because of the ongoing growth of its base business, the ageing demographic tailwinds, continuing COVID-19 testing, a growing dividend, and the ability for the business to keep putting excess cash to good use with acquisitions and share buybacks.
