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Why the Pro Medicus (ASX:PME) share price rocketed 22% higher last month

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The Pro Medicus Limited (ASX: PME) share price was a particularly positive performer in October.

During the month the healthcare technology company’s shares recorded an impressive 22.4% gain.

This compares to a 1.9% gain by the benchmark S&P/ASX 200 Index (ASX: XJO).

Why did Pro Medicus outperform the market?

Investors were fighting to buy Pro Medicus shares last month following the release of an update which revealed a major new contract win.

That contract win was with one of the largest university hospitals in Germany, LMU Klinikum.

According to the release, Pro Medicus has signed a seven-year deal with LMU Klinikum worth a total of A$10 million.

The deal will see its popular Visage 7 technology deployed throughout LMU Klinikum’s radiology and subspecialty imaging departments. This will replace a number of systems from legacy vendors with a single centralised platform from December.

In addition to this, Visage will be used in the hospital’s state of the art operating theatre suite for high definition video documentation and point-of-care ultrasound archival and viewing.

Why is this a big deal?

While a $10 million contract isn’t necessarily a game-changer, it is who the contract is with that has got both the company and investors excited.

Pro Medicus’ Visage Imaging Managing Director, Dr Malte Westerhoff, explained: “We are very excited about this project. LMU Klinikum is a thought leader in making a digital strategy a core principle of their operations. We are confident that our technology and expertise can make a significant contribution to helping LMU Klinikum further enhance efficiency and achieve better patient outcomes.”

Dr Westerhoff also pointed out that multinational imaging equipment vendors have had a stranglehold on this part of the market for a long time, which makes this deal a real milestone.

He added: “Traditionally, large European teaching hospitals like LMU Klinikum have standardised on IT platforms from large, multinational imaging equipment (modality) vendors making this a difficult market to penetrate. So this is a very significant milestone for us in this highly competitive market.”

Is it too late to invest?

While Pro Medicus shares are certainly not cheap, I believe they could still be a great option for buy and hold investors due to its exceptionally strong long term growth potential.

In light of this, I think it is worth considering a small position in a balanced portfolio.

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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 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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