Why this ASX biotech company's share price is up 25% in 2019

The Pro Medicus Limited (ASX: PME) share price has started the year strongly, increasing by approximately 25% since the start of January 2019.

| 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

As big data and smarter solutions gain momentum across businesses around the globe, some Australian biotech companies have great service offerings to benefit from the trends.  Here is one up and comer who's share price has been on a stellar run and is worth considering for your portfolio.

Pro Medicus Limited (ASX: PME) is a leading health imaging company that provides a full range of radiology IT software and services to hospitals, imaging centres and health care groups worldwide.

The Pro Medicus share price has started the year strongly, increasing by approximately 25% since the start of January 2019.  This increase in share price was largely driven by investor sentiment regarding the recently released results.

A strong revenue figure of $25.3 million (up 59.4%), along with a reported net after-tax profit of $9.1 million (up 184.3%) highlight that Pro Medicus continues to grow the top-line.  Along with this, the balance sheet looks very strong in general as cash reserves are solid at $24.7 million.

Even more impressive is that Pro Medicus is debt free and has announced a fully franked dividend of 3.5c per share, along with a special fully franked dividend of 2.5c per share.

Importantly, the strong result is reflected across all three major geographical regions with the CEO commenting that: Australia, USA and Europe were all progressing well.

A highlight of the half was that Pro Medicus achieved a key contract win when it announced a $27 million deal with Partners Healthcare in the USA for Massachusetts General Hospital and Brigham Women's hospitals.  This will help the company roll out its Visage technology and allow it to highlight itself in some of the best hospitals.

The current market capitalisation of Pro Medicus is only $1.5 billion so it is still a small-cap share but it has demonstrated explosive potential over the past decade.  EPS is expected to nearly double by 2021 and the company is expected to continue paying dividends.  It currently trades on a P/E ratio of 111.

Foolish Takeaway

Pro Medicus' technology not only takes images but helps doctors receive it much faster in any location.  It's helping make the world a smaller place and allows for quicker decision making in critical situations, which can save lives.

I believe that Pro Medicus is revolutionary and it's only a matter of time before more hospitals switch to this technology.  Visage can handle big files, and this will be essential when 5G is introduced.  Down the track, this may be able to evolve with AI and become even bigger.

In saying that, the company is still small and management's ability to scale big is going to be very important here.  Whilst there are some real positives on PME, at a P/E of 111 it might be worthwhile to wait for a pullback.

Motley Fool contributor Michael Guinery owns shares in Pro Medicus Ltd. 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 Pro Medicus Ltd. 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.

More on Share Gainers

Man drawing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why Core Lithium, Life360, Syrah, and Xero shares are jumping today

These ASX shares are ending the week on a high. But why?

Read more »

Smiling elderly couple looking at their superannuation account, symbolising retirement.
Share Gainers

These were the best performing ASX 200 shares in February

These shares were making their shareholders smile last month.

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

Why Harvey Norman, Macquarie Technology, Ramsay Health Care, and Star are rising

These ASX shares are having a strong day. But why?

Read more »

A man looking at his laptop and thinking.
Share Gainers

Should I buy Nvidia stock as an Australian investor?

Many Aussies are thinking of jumping on the bandwagon, but they need to think about these issues first.

Read more »

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
Share Gainers

Here are the top 10 ASX 200 shares today

It was a rough day for ASX 200 investors this Wednesday.

Read more »

A woman's hair is blown back and her face is in shock at this big news.
Share Gainers

Why APM, DroneShield, EOS, and NextDC shares are charging higher

These ASX shares are having a strong session on Wednesday. But why?

Read more »

A happy businessman pointing up, inidicating a rise in share price
Materials Shares

Why are ASX lithium shares like Liontown having such a bumper session today?

Lithium shares are defying the broader market on Wednesday.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

This ASX All Ords stock just surged 88% in less than 3 days! Any guesses?

The ASX All Ords stock is drawing intense buying interest from investors this week.

Read more »