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Here’s why the Volpara share price has nearly tripled over the last year

The Volpara Health Technologies Ltd (ASX: VHT) share price is now up 75% in 2019 and has nearly tripled from 68 cents this time last year to a record high of $1.94 this afternoon to mean it’s catching the attention of many small-cap investors.

Volpara is a business I first flagged to readers as having big potential around the time of its initial public offering in April 2016 when it floated at just 50 cents per share.

As a software-as-a-service medical imaging business Volpara measures breast density in woman to aid the detection of breast cancer and for investors ticks all the boxes (except perhaps valuation) as a founder led, scalable, market leader that is straddling two lucrative sectors in tech and healthcare.

The shares have also received a boost recently on the back of news that the U.S. regulator the FDA wants to expand mandatory reporting of breast density in oncology testing procedures.

I have previously compared the business to probably the share market’s best performing business over the past 5 years in Pro Medicus Limited (ASX: PME) that also offers cloud-based radiology and medical imaging software platforms to the world’s leading health businesses.

However, I’d caution that Volpara’s valuation around $340 million looks scarily high given annualised recurring revenue (ARR) (i.e. total expected revenue for the year ahead, not trailing revenue) stands at just NZ$6.63 million, with it posting an operating cash loss of NZ$2.75 million for the quarter ending December 31 2018. The company is likely to report its 4c quarterly cash flow report tomorrow.

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Tom Richardson owns shares of Pro Medicus Ltd.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of VOLPARA FPO NZ. The Motley Fool Australia has recommended 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.