Why the Pro Medicus Limited share price is going nuts this morning

The Pro Medicus Limited (ASX:PME) share price is rocketing skyward today.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Pro Medicus Limited (ASX: PME) share price is up 8% to $4.68 in early trade after the provider of digital medical imaging and patient management systems announced a big new deal with Australian healthcare leader Primary Health Care Limited (ASX: PRY).

Pro Medicus shares are up 1,565% over the past five years thanks to the blockbuster success of the company's Visage 7 operating system that large healthcare providers subscribe to in order to manage patients' medical imaging records from booking appointments to screening, diagnosis, and electronic record keeping.

The smarter and more functional an online system the more it helps healthcare providers save time and ultimately money by improving the management of the vast amount of electronic medical records now accumulated across healthcare systems.

The company said today's deal with Primary will deliver an 11% uplift to FY 2016's total revenues every year for the next five years. In FY 2016 total revenues were $27.58 million, which suggests the deal is worth around $2.86 million per year to Pro Medicus over five years, or around $14.5 million in total.

For the six-month period ending December 31 2017 the company posted a profit of $4.8 million, with future contracted revenue (excluding today's deal) of $115 million over the next five years. So while today's news is good, it's not a game changer for a company that has a volatile share price reflecting its fast-moving nature.

Pro Medicus has an exciting outlook but the question for investors is how much is that already reflected in a market valuation around $450 million with the stock selling for $4.68?

Another promising medical imaging business in the breast screening space is Volpara Health Technologies Ltd (ASX: VHT). It's still at the loss-making startup stage with a market value of $43 million and a long road ahead to prove itself as the real deal.

Motley Fool contributor Tom Richardson has no position in any stocks mentioned. You can find Tom on Twitter @tommyr345 The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »