Is the Pro Medicus Limited share price dirt cheap?

The Pro Medicus Limited (ASX: PME) share price has gone nuts, yet it may continue to impress long-term investors in my opinion.  

The Pro Medicus Share Price is up 600% in a decade

PME share price

Source: Google Finance

Who is Pro Medicus?

Pro Medicus is a Melbourne-based software company, specialising in the development of products used by doctors, such as radiologists. The company’s key software enables these medical professionals to rapidly send and receive images (think: x-rays) across smart devices. The company’s key product is Visage 7.

Interestingly, many of Pro Medicus’ customers choose to pay on a ‘per view’ basis, with a minimum number of transactions. Therefore, customers are billed each time they inspect an image. Together with other developments in academia, the company is creating a long-term annuity stream of sales.

The company is run by its founders, with its senior management having a long tenure and skin in the game.

Growth potential

In recent years, Pro Medicus has enjoyed a number of wins in key overseas markets. In 2016, the company achieved four key contracts with US hospitals and made its first sale in Europe. The company is also making strides to improve its reputation with other hospitals following big contract wins, such as the Mayo Clinic in 2016.

The $520 million company pays a dividend and has a strong balance sheet. But on the face of it, Pro Medicus’ price-earnings ratio of 83 times makes its shares look expensive.

However, although there is a risk for it to fall short of expectations and be sold down in the short to medium term, I believe the company is a very promising long-term prospect at today’s prices.

Foolish Takeaway

Pro Medicus shares have enjoyed a lot of success in recent years and do not appear cheap. However, if you are investing for the long-term (e.g. 10 years) I think there are many things to like about Pro Medicus.

So although it is not dirt cheap, I’m tempted to buy it — even at today’s prices.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask.

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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