Why Pro Medicus Limited shares are rocketing today

The share price of Pro Medicus Limited (ASX: PME) has surged 9% higher in early trade following the announcement of another key contract win in the United States.

The leading health imaging company has reported that its wholly-owned US-based subsidiary Visage Imaging has signed a six-year contract worth A$18 million with Mayo Clinic.

The contract is based on a transaction licensing model and will see Pro Medicus’ Visage 7 technology implemented across Mayo Clinic’s radiology practices. This is the third significant contract win in three months for the company thanks to this increasingly popular technology.

Visage 7 has fast server-side processing technology delivering enterprise diagnostic, clinical, and mobile viewing solutions for healthcare institutions that want to dramatically accelerate and enhance the delivery of radiology services.

CEO Dr Sam Hupert had this to say on the contract win:

“This is a very significant contract for us and further validates our belief that Visage 7 is uniquely positioned to cater for the needs of the most sophisticated and demanding clinical environments. It has the speed and functionality to meet the requirements of a large and diverse group of high-end clinical users as well as the scalability to handle the huge data volumes that a medical enterprise of this size generates.”

I believe this latest contract win is one of many to come in the future. The company’s radiology technology is widely regarded by many in the industry as being best in class. This is helping it gain a lot of traction in the US picture archiving and communication system market which the company has previously estimated to be worth around US$1.7 billion annually.

This bodes well for growth in my opinion and makes Pro Medicus a tempting long-term growth investment, especially considering that it carries zero debt on its books. But because its shares are trading at 152x trailing earnings, I feel it would only be suitable for those with a high risk tolerance.

Investors with a lower tolerance for risk who are looking for exposure to the healthcare industry might want to take a closer look at Ramsay Health Care Limited (ASX: RHC) or ResMed Inc. (CHESS) (ASX: RMD) instead.

Finally, if you're looking for even more ideas for your portfolio then I would highly recommend these three growing blue chip shares. They provide a solid dividend and I believe they can produce share price gains in the months ahead.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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.

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