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

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.

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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.

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