The Pro Medicus Limited (ASX: PME) share price has bounced back from Friday’s heavy decline with a strong gain on Monday.
In early afternoon trade the healthcare technology company’s shares are up almost 6% to $10.78. This latest gain means that its shares have risen almost 27% since this time last month.
Why are Pro Medicus’ shares on fire?
Investors have been scrambling to get hold of the company’s shares after the release of a strong full year result last month.
For the 12 months ended June 30, Pro Medicus posted a 13.9% increase in revenue to $36 million and a 36.7% jump in profit after tax to $12.7 million.
The catalyst for this strong result was the positive performances of its North American and European operations. These operations posted an 18.4% and 33.2% increase in segment revenue, respectively, during FY 2018.
Several new contracts in North America helped drive the strong revenue growth in that region. This included an A$18 million, seven-year contract with Yale New Haven Health and a A$15 million, seven-year contract with Mercy Health for Visage Open Archive.
But why are its shares higher today?
On Friday Pro Medicus’ shares fell reasonably sharply due to what appears to have been profit taking from some investors following a strong rally. I suspect that some of today’s gain can be attributable to bargain hunters swooping in to pick up shares on the weakness.
But in addition to this, the company released an investor presentation this morning. While there wasn’t anything overly new within it, the presentation did emphasise the strong growth opportunities the company has over the long-term.
This is likely to be driven by its growing North American footprint, its market leading technologies, new product releases, and the fact that the company is positioned to leverage artificial intelligence.
In respect to the latter, management believes healthcare imaging is ideally suited to AI and that its Visage product can take advantage of the emerging technology.
Should you invest?
While its shares are undoubtedly expensive and carry a fair amount of risk, I still see a lot of value in them for investors that are prepared to hold on for the long-term.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited, Pro Medicus Ltd., and VOLPARA FPO NZ. 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.