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Volpara share price has rocketed 11% after beating its FY 2019 guidance: Time to invest?

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The Volpara Health Technologies Ltd (ASX: VHT) share price has had a positive start to the week.

In early trade the shares of the medical technology company whose AI imaging algorithms assist the early detection of breast cancer are up a sizeable 11% to $1.61.

Why is the Volpara share price storming higher?

This morning the company announced that it has exceeded its FY 2019 guidance for 85% growth in Annual Recurring Revenue (ARR) and coverage of 7% of women screened in the United States.

According to the release, at the end of FY 2019 Volpara’s ARR stood at NZ$6.63 million, representing growth of 86% on the NZ$3.6 million recorded in FY 2018.

This has been driven by strong market share gains, with Volpara’s software now covering 7.1% of all women screened in the United States.

In addition to this, Total Contract Value (TCV), which represents the value of contracts signed in the specified period, has increased 42% since the end of FY 2018 to NZ$15.8 million.

Volpara’s CEO Dr Ralph Highnam was pleased with the company’s performance in FY 2019.

He said: “FY2019 ended very strongly indeed with our first NZ$1M order, our first NZ$1M ARR quarter, and the signing of a number of prestigious clinics, including I-MED Radiology Network in Australia—all of which was capped off by the FDA’s proposal to require that every US woman be notified of her breast density. It all bodes well for future growth.”

Pleasingly, Dr Highnam appears optimistic that its strong performance can continue in FY 2020.

He added: “Having over 7% of US women now under contract provides an astonishing amount of data for applying serious AI to enable better regulatory reporting, improved ROI for breast imaging clinics, and even better breast care outcomes for women. We’re looking forward to FY2020 with great confidence.”

Should you invest?

I think this strong performance demonstrates why Volpara could be one of the best growth shares in the healthcare sector along with fellow medical technology companies Nanosonics Ltd (ASX: NAN) and Pro Medicus Limited (ASX: PME).

Especially after the FDA’s recent proposal to require that every US woman be notified of her breast density. I expect this to lead to increasing demand for its software, driving its ARR notably higher over the next few years.

It is, however, a reasonably high risk option so may be unsuitable for some investors.

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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.

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