Sonic Healthcare is recommended as the top investment based on the analysis. It has shown consistent profit growth over the past 5 years, with profits increasing 15% in 2019. Liquidity has also increased steadily. The solvency ratio and cash flows demonstrate financial strength. Sonic has a strong balance sheet and reported record profits in 2019 following an acquisition that expanded its business in the large US market.

1. HEALTHCARE SCRIPS
Investment
ABSTRACT
This report aims to help a fund manager or
investor or non-accounting or non- finance
specialist in deciding to invest in the
company providing the healthcare services
and can yield good returns.
ABC
Accounting

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Table of Contents
i. Executive Summary............................................................................................................. 1
ii. Introduction......................................................................................................................... 1
iii. Discussion………………………………………………………………………………………3-9
a. Financial Data
b. Non-Financial Data
c. Statistical Analysis
d. Financial Analysis
- Profitability
- Liquidity
- Solvency
- Financial Distress
e. Regression Analysis
f. Correlation Value
g. Regression and Correlation Relationship
h. Excel Dashboard
iv. Conclusion………………………………………………………………………………………10
Reference

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i. Executive Summary:
The healthcare sector is going through a period of significant change, influenced by trends i.e. Ongoing
population growth and life expectancy growth; improving survival rates from common diseases and improving
treatment options; Artificial intelligence (AI), robotics, and big data analysis; Innovation in medical treatment
i.e. from virtual reality training for rare surgeries. Increasingly informed and empowered consumers demanding
better ways of accessing healthcare when, where, and how they want it.
For the last 4-5 years, the healthcare sector is giving strong returns, one can’t expect returns like these to be
repeated going forward. The sector’s valuations are close to historical highs and governments are doing their
best to rein in the growth of healthcare costs. Some companies will perform better than others,particularly those
with reasonable valuations that continue to invest and innovate.
When an investor is looking at the healthcare sector stock to buy, there are two factors they consider:
1. Are their good quality scrips within the healthcare sector?
2. If yes, are their valuation is attractive?
The answer to these questions is yes,as there are many high-quality healthcare companies listed in the Australia
stock exchange and they are the global leaders. These companies possess the criteria that an investor always
looks for in-stock i.e. a strong competitive advantage, recurring earnings, and capable management. These
include Sonic Healthcare, Mayne Pharma, Virtus Health, Pathology Tech and Healius, to name a few.
The preparation of this report aims to help a fund manager or investor or non-accounting or non- finance
specialist in deciding to invest in the company providing the diagnostics services.
ii. Introduction:
The objective of this report is to issue an investment recommendation for five companies as well as to determine
whether firms’ discharge can enhance profitability. The company access within this report is selected based on
the availability of information. The companies selected for this report are Sonic Healthcarei, Mayne Pharmaii,
Virtus Healthiii, Pathology Techiv (erstwhile IVAX Diagnostics), Healiusv (erstwhile Primary Health Care Ltd.).
To determine a relationship that exists between the Net Profit Margin (“NPM”), Long-term Debt to Equity
(“LTD/E”), and Firm Size (i.e. Total Assets), a Correlation analysis conduct. It determines that only two
variables correlate which include the Long Term Debt to Equity and Net Profit Margin and the second one is
Total Assets and the Net Profit Margin. All other variables do not appear to correlate to each other. Therefore, a
non-linear relationship can be assumed.
The results further confirm by multiple Regression analysis. The multiple Regression analysis conducts to
determine whether leverage and firm size can combine predict movements in the Net Profit Margin (“NPM”).
However, the model as a whole and the Coefficient of each independent variable is not statistically significant.
This suggests that this model cannot use to predict movements in the Net Profit Margin (“NPM”).
The investment recommendations are based on the financial position of each company. Each company was
analyzed in terms of its Profitability, Liquidity, and Solvency. Correlation show where there is zero value there
is no relationship between the variable but where the result is >.90 reflect the strong relationship between the
variables.

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Special Note:-
Missing & Extreme Values: I. I have visited the respective site of companies to check the financial report
availability and for the under-mentioned company data is unavailable on respective sites.
Company Name Remarks
Pathylogytech  Numbers are not available for 2010 & 2011
Virtus Health  Numbers are not available for 2010 & 2011
iii. Discussion:
a. Financial Data:

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b. Non-financial Datai.e. ESG score
c. Statistical Analysis:

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d. Financial Analysis:-
For financial analysis purposes, 5 years of data have been selected. Financial analysis is divided into four
categories i.e. profitability, liquidity, solvency, and financial distress. Let’s discuss one by one in all
categories.
1. Profitability: While comparing the profitability of all listed scrips i.e. Sonic Healthcare, Mayne
Pharma, Pathologytech, Virtus Health, and Healius, only Sonic Healthcare profits (after tax) show the
increasing trends i.e. 10% year on year basis. In fact, in 2019, there is an increase of 15%.
2. Liquidity: While I am
comparing the liquidity trends of all scrips
i.e Sonic Healthcare, Mayne Pharma,
Pathologytech, Virtus Health, and
Healius. In the case of Sonic Healthcare,
there is an increase of 11% liquidity while
comparing data between 2015 & 2016. There is a downward trend of -7% while comparing data between
2017 & 2018. At the same time while I am comparing 2018 and 2019 data there is an upward trend of
44% in liquidity.
Mayne Pharma liquidity shows the increasing
trend of 22% while comparing data between 2015
& 2016 data. Then there is a steep decrease of
17% while comparing data between 2015-2016 &
2017-2018. At the same time, 2018 & 2019 data
shows 6% which shows a 1% increase in
comparison with 2017-2018.
Pathylogytech liquidity is showing the negative
trend i.e. -27% while comparing data between
2015 and 2016. This trend can be seen in the next two years 2017 & 2018 data i.e. -23% as well. While
comparing data for the year 2018 & 2019 trend shows positive data i.e. 31%.
Virtus Health liquidity shows a moderate increasing trend of 6% while comparing data between 2015 &
2016. While comparing the data between
2017 & 2018 there is a steep decrease
observe i.e. -14%. There is a moderate
decrease i.e. -.08% while comparing data
between 2018 & 2019.
Healius cashflows show a positive
liquidity trend i.e. 12% while comparing
data for 2015 and 2016. At the time of comparison of 2017 and 2018 data trend shows the negative trend
i.e. -2%. There a steep positive increase of 27% while comparing data for the year 2018 & 2019.
3. Solvency Ratio:
While I am comparing the solvency ratio both
scrips i.e. Sonic Healthcare & Virtus Health
showa positive trend. Now let’s discuss scrip wise
years wise trends.

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In the case of Sonic Healthcare scrip, an
average solvency ratio is .14. From the
financial year 2015 to 2016, there was an
increase of 12% in the solvency ratio.
While I am comparing the 2017 & 2018
data, the solvency ratio there is an
increase of 10%. At the time of
comparison between 2018 & 2019 data,
this ratio has increased by 4%.
Mayne Pharma overall solvency ratio is
negative. There is a drastic movement from 0.14
to -0.23 between 2017 and 2018 period.
Pathologytech shows negative trends.
Comparison of 2015 number with 2016 shows
there is a steep rise is a ratio i.e. -1315%. While
I have compared the 2017 and 2018 ratio there is
a decline of -49%. While comparing data for the
year 2018 & 2019 this ratio has touched -171%.
Virtus Health shows the positive trends
in the first four years i.e. between 2015-
2018. The year 2015-2016 shows there
is an upward movement of 17%. Again
comparing between 2017 & 2018 their
an upward trend of 17%. This ratio
declines by -27% while comparing the
2018 Vs. 2019 ratio.
Healius also shows negative trends.A comparison
of 2015 numbers along with 2016 shows there is a
trend of -25%. While the comparison between
2017 and 2018 shows there is a negative trend of -
101%. But while a comparison between 2018 and
2019 percentage shows a positive upward
movement in the solvency ratio.
4. Financial Distress:
Sonic Healthcare shows a positive trend
in terms of cash flows. The first
comparison took place between 2015
and 2016 numbers which reflect there is
a positive movement of 16%. 2017 and
2018 comparison shown there is a sharp
decline in -28%. While the comparison
between 2018 and 2019 shows a steep
increase in cash inflows of 135%.
Mayne Pharma financial distress numbers are not very encouraging. While I am doing a comparison
between 2015 and 2016 numbers it shows the downward trend and reaches to -20%. Comparison between
2017 and 2018 numbers shows an upward trend of 39%. While comparison took place between 2018
and 2019 there is a moderate increase of 2%.

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Pathologytech shows a negative trend for two subsequent financial years. The financial year 2015 and
2016 shows a declining trend of -25%. While the
next comparison between the years 2017 and 2018
again reflects a declining trend of -22%. The next
comparison financial year 2018 and 2019 shows
an increasing trend of 28%.
Virtus Healthshows a positive trend of 21% while
comparing 2015 and 2016 data. The next
comparison between the year 2017 and 2018
reflects the declining trends i.e. -21%. The next
comparision between 2018 and 2019 also showthe
declining trend -13%.
Healius shows a mixed trend. While comparison took place between 2015 and 2016 financial distress
shows a positive trend of 25%. The next comparison between the year i.e. 2016 and 2017 financial
distress shows a negative trend -12%. The next comparison between 2018 and 2019 shows a positive
trend of 43%.
Note:Summing up all the details it shows that Sonic Healthcare gives a positive trend. Sonic healthcare
profits (after tax) are showing increasing trends i.e. 15% in the 2019 year. The liquidity trend also
showing an upward trend of 44% in liquidity. The solvency ratio has reached 4%. Cash flow shows a
steep increase in cash inflows of 135%.

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e. Regression Analysis:
Analysis: The regression line shows the x-axis (i.e.
Debt to Equity) decrease also affects the y-axis (i.e. Net
Profit Margin). Every decrease of x this will reduce the
-.0337 is y. If x is zero y will increase by 4.87%.
Where ever R2 =.0132 shows that there 1.32 variation
in y (i.e. net profit).
Analysis: The regression line shows the x-axis (i.e.
total asset) decrease also affects the y-axis (i.e. Net
Profit Margin). Every decrease of x this will reduce
the -.4828 is y. If x is zero y will increase by 1.04%.
Where ever R2 =.1086 shows that there 10.86
variations in y (i.e. net profit).
f. CorrelationValue:
Note: As here r value is coming to zero, there is no correlation between Net profit margin and long-term
debt to equity ration. But at the same time in the second case where the correlation i.e. r < .90 it shows there
is a strong relationship between Net profit margin and total assets.

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g. Regression Vs.CorrelationRelationship:
Special Note: Long terms debt is there but at the same time profits are increasing significantly.
h. Excel Dashboard:

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iv. Conclusion and recommendation:
At the current point in time, Sonic Healthcare is a good investment avenue from a long-term point of view, based
on their quality and valuation. Sonic also has a strong balance sheet. Sonic Healthcare produced a record net
profit of A$550 million for the 2019 financial year, on revenues of A$6.2 billion. The Board declared total
dividends per share for the year of A$0.84, a 4% increase on the previous year. In the year 2019 Sonic acquired
the US-based Aurora Diagnostics,and the equity raised to finance the acquisition.Aurora opened further growth
paths for Sonic in the world’s largest laboratory medicine market. The equity raised and the strong cash
generation enabled a reduction in net debt of A$184 million, lowering Sonic’s gearing below the long-term
average. The financial results for 2019 showed that the Return on Invested Capital (‘ROIC’) increased from
8.6% to 8.7%.

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References:
i (Annual Report , 2010-2019);https://www.sonichealthcare.com/
ii (Annual Report, 2010-2019); http://www.maynepharma.com/
iii (Annual Report, 2012-2019);https://www.virtushealth.com.au/
iv (Annual Report, 2012-2019);https://pathologytechnology.org.au/
v
(Annual Report, 2010-2019); https://www.healius.com.au/