The Pro Medicus Limited (ASX: PME) share price is down 6 per cent this afternoon to $27.90 and is now down around 26 per cent since September 5 when it was revealed two of the company's founders sold 1 million shares each at $36.10 per share. The institutional investors who picked up the shares will also be underwater on those holdings for now.
Long-term holders will still be over the moon though with the stock up around 30x over just the past 5 years on the back of fast rising revenues, profits and dividends.
As a software-as-a-service player it also boasts attractive economics and very high profit margins that should impress investors.
Moreover, it also retains a robust outlook thanks to its reportedly market-leading technology in what is a lucrative global healthcare space.
The catch is the valuation that looks sky high on every metric.
At $27.90 it has a market value of $2.9 billion to place it on 58x trailing revenues and 151x trailing earnings per share of 18.46 cents.
I rarely sell growth businesses I own, but I must admit to selling my own stake last week as well at prices close to the founders. I still remain interested in the stock and expect I will be able to pick it up much cheaper before February 2020.
Leading small or mid-cap growth stocks like Atlassian, Twilio, Wisetech Global Ltd (ASX: WTC) and Appen Ltd (ASX: APX) have been hammered this week as market commentators point to a rotation from growth to value stocks.
The rotation is being triggered by rising US benchmark treasury yields that have gained 17 basis points to 1.79% over the past week. Common wisdom is that growth shares will perform worse if sovereign paper suggests returns on less risky assets are rising.
