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Pro Medicus Limited shares rise on new contract win

One of my favourite shares in the healthcare sector right now would have to be Pro Medicus Limited (ASX: PME).

For those that are not overly familiar with it, Pro Medicus provides a full range of radiology IT software and services to hospitals, imaging centres, and health care groups worldwide.

The key attraction to the company for me is its Visage 7 technology which delivers fast, multi-dimensional images streamed via an intelligent thin-client viewer.

This technology allows radiologists and referring physicians to have a customised protocol-driven workflow to natively view multi-dimensional imagery and a patient’s complete imaging history.

As you might expect, the technology has won a lot of admirers over the last couple of years. One key admirer was US-based Yale New Haven Health, which last year signed a seven-year contract that will see Visage 7 implemented across all of Yale’s radiology departments and integrated to their electronic health records for imaging results.

But it isn’t just Visage 7 that is attracting attention, the company’s Visage RIS technology is equally impressive.

Visage RIS is a comprehensive, enterprise-class and state-of-the-art radiology information system which allows patient registration, billing, scheduling, financial reports, and PACS integration.

This morning the company announced that I-MED Radiology Network has signed a five-year agreement that will see it standardise Visage RIS across all its practices.

I-MED is Australia’s largest diagnostic imaging provider and performs over 4.6 million patient procedures annually across New South Wales, ACT, Victoria, Tasmania, Northern Territory, and Queensland.

According to the release, I-MED will begin by transitioning its Regional Imaging and Queensland practices to Visage RIS over the next 12 months, which is expected to generate revenue of $1.4 million per annum once fully implemented. After which, I-MED will extend Visage RIS to its Victorian, NSW, and ACT operations.

Dr Sam Hupert, CEO of Pro Medicus, believes that this deal cements its position as a leader in the Australian RIS market and I would have to agree with him.

Should you invest?

At present Pro Medicus’ shares are changing hands at approximately 87x trailing earnings.

This is clearly a significant premium to the market average and means an investment should be considered high risk.

However, given its leadership position in a market that is expected to grow significantly in the future, I think it is worth considering a small position in the company alongside other healthcare stars such as CSL Limited (ASX: CSL) and ResMed Inc. (ASX: RMD).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended PRO Medicus Ltd. The Motley Fool Australia has recommended ResMed Inc. 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 Scott Phillips.

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