The ASX 200 stock Sonic Healthcare Ltd (ASX: SHL) is marching higher. As of Tuesday afternoon, the $12 billion share is swapping hands for $23.62 apiece, up 1.2%.
Sonic Healthcare is still 13% lower in 2025. Many analysts believe now is the time to consider the seventh largest ASX 200 healthcare share by market capitalisation.
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Growing demand for pathology
Sonic Healthcare is a global diagnostics and pathology powerhouse. The ASX 200 stock operates all over the world, with its main operations in Australia, Europe and North America.
Its underlying business is solid with a healthy balance sheet, it has a bright future fuelled by an ageing global population and it reported sound full year results. In FY 2025 the company delivered revenue of $9.6 billion, up 8% year-over-year. The net profit increased with 7% to $514 million and EBITDA rose 8%, while operating cash flow also surged by 21%.
The ASX stock has used its strong cash flows – bolstered during COVID – to fund acquisitions in Germany and the US and fund investments in digital pathology and AI. This could drive future growth.
Share price halved after COVID
Sonic Healthcare saw its share price nearly halved after the strong profits of the COVID-testing surge. Over the last month, the ASX 200 stock has recovered slightly, rising just over 11%. However, compared to the same time last year, it is still down by 18.8%.
The recent sell-off means investors can now buy this ASX stock at a discount. For investors willing to hold through volatility and who believe in the long-term demand for diagnostics and pathology services, this could be a good time to buy.
High dividend and upside
The ASX 200 stock continues to deliver dividends. In FY 2025 it declared a full-year dividend of $1.07 per share.
According to Bell Potter, Sonic is a good choice for investors seeking income opportunities. The broker expects Sonic Healthcare's earnings to rise due to cost-cutting, recent acquisitions, and increased activity at its labs and clinics returning to pre-pandemic levels.
Bell Potter forecasts dividends of $1.09 per share in FY 2026 and $1.11 in FY 2027, with Sonic shares at $23.62, resulting in a dividend yield of 4.6% and 4.7%.
The broker has a buy rating and $33.30 price target on its shares. Based on the share price at the time of writing, this implies potential upside of 41% for investors over the next 12 months.
Bell Potter notes:
One can expect SHL to generate solid mid-high single digit organic EPS growth with addon benefit of acquisitions to drive double-digit growth on a normal basis. SHL is a sold compound generator, which is why it holds appeal in our view.
