The S&P/ASX 200 Index (ASX: XJO) healthcare share Sonic Healthcare Ltd (ASX: SHL) reported its results this week, which included a number of positive growth numbers.
It's worth asking whether the business is a good buy at this valuation, given it rose around 10% on the day of the report.
Let's first remind ourselves what the business reported by looking at the numbers that were revealed.
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HY26 earnings recap
The pathology business reported that revenue grew 17% to $5.4 billion in the first half of FY26. Within this growth, there was an organic growth of 5%.
Earnings grew at a good pace, though not as fast as the revenue growth. Operating profit (EBITDA) climbed by 10% to $907 million, net profit increased 11% to $262 million, earnings per share (EPS) grew 8% to 53.1 cents, and operating cash flow rose 10% to $682 million. These numbers allowed the business to increase its interim dividend by 2.3% to 45 cents per share.
It wasn't a surprise to see that its German revenue increased 52% to $1.36 billion, thanks to the LADR acquisition, which settled on 1 July 2026. Organic revenue grew by 5%, and, combined with synergies and cost control, this led to a higher profit margin. Germany made around a quarter of the ASX 200 healthcare share's total revenue.
Australian pathology delivered organic revenue growth of 5% (and total revenue of $1.08 billion) while the USA saw total revenue growth of 3% to $1.05 billion (and no organic growth)
Impressively, the UK segment delivered 24% organic growth and 30% total growth to $489 million. The ASX 200 healthcare share benefited from a number of new contracts.
Is the Sonic Healthcare share price a buy?
After reviewing the result, broker UBS noted that management is prioritising EPS and return on invested capital (ROIC), with a review and restructuring in the US, as well as plans to sell and lease back properties in Australia, which could support a share buyback.
UBS noted that Sonic (and its peers) are lobbying for more government funding to cover the increased wages mandated by the Fair Work Commission ruling, to ensure the same quality of service. The broker is sceptical that the government will increase funding amid broader budgetary pressures, so margin headwinds seem "unavoidable".
The broker highlighted that Sonic is delivering weaker organic growth than peers in the US, including the loss of an Alabama contract. Meanwhile, the new NHS contract was an impact on markets, but supports full-year revenue growth.
UBS also thinks the US restructuring is "sensible but does not address the core issue: declining market share as larger peers consolidate via hospital deals". Sonic "has not participated in this trend and risks being left behind."
The broker has a neutral rating on the ASX 200 healthcare share, with a price target of $21.80, suggesting a decline over the year ahead. UBS forecasts the business can grow net profit to $597 million in FY26 and $646 million in FY27.
