Is it time to buy these 2 hot ASX healthcare shares?

The 2 ASX healthcare shares in this article are looking hot. Is it time to buy them? One of those is Volpara Health Technologies Ltd (ASX:VHT).

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woman doctor with MRI scans

There are some ASX healthcare shares that are creating a lot of growth at the moment. Is it time to buy them?

Healthcare is one of the largest sectors on the ASX with a number of major companies with global earnings such as CSL Limited (ASX: CSL), Ramsay Health Care Limited (ASX: RHC) and Cochlear Limited (ASX: COH).

But there are some smaller ones that are expanding their market share and growing revenue:

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is a medical technology business that provides clinical functions for screening clinics provide feedback on breast density, compression, dose, and quality, while its enterprise-wide practice-management software helps with productivity, compliance, reimbursement and patient tracking.

In the recent update for the third quarter of FY21 it said that it generated its largest-ever third quarter sales performance, with annual recurring revenue (ARR) reaching NZ$20.7 million at the time. Its average revenue per user (ARPU) at US$1.22 – up 5% from the second quarter.

Also, last month, the ASX healthcare share announced the acquisition of CRA Health. It’s described as an industry leader in breast cancer risk assessment spun out from Massachusetts General Hospital, a Harvard Medical School teaching hospital.

For Volpara, CRA adds ARR of over US$4 million, average revenue per user (ARPU) of around US$1.70 and coverage of around 6% of US breast screenings.

CRA’s software is integrated with the major electronic health record (EHR) and genetics companies.

Volpara will have ARR of around US$17.5 million and at least one product used in over 30% of US breast screenings.

Broker Morgans has a share price target for Volpara of $1.92, suggesting potential upside of close to 40%. The broker is a fan of the CRA acquisition and likes the increasing market share of women breast screenings.

Pro Medicus Ltd (ASX: PME)

Despite recent share sales by the founders of the business, the share price keeps heading higher.

Pro Medicus describes itself as a leading medical imaging IT provider. It offers a full range of radiology IT software and services to hospitals, imaging centres and health care groups worldwide. Visage Imaging is the key software offering.

The ASX healthcare share has been successfully winning many of the large contracts that have been on offer in both Europe and North America. This will drive earnings higher in the coming years, as they are multi-year contracts.

In the recent FY21 half-year result it reported that revenue rose 7.8% to $31.6 million, underlying profit before tax grew 25.9% to $18.8 million and net profit after tax (NPAT) grew 12.4% to $13.5 million. The earnings before interest and tax (EBIT) margin was around 59%, its cash reserve grew $7.5 million to $50.9 million and the interim dividend was increased by 16.6% to $0.07 per share.

Morgans is not convinced that the current Pro Medicus share price represents good value. It has a share price target of $41.30 for the ASX healthcare share. However, it said the result was strong as the business recovers from COVID-19 impacts.

The broker believes that Pro Medicus can generate earnings per share (EPS) of 42 cents for FY22, meaning it’s valued at 110x FY22’s estimated earnings.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. and VOLPARA FPO NZ. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and CSL Ltd. The Motley Fool Australia has recommended Cochlear Ltd., Pro Medicus Ltd., Ramsay Health Care Limited, and VOLPARA FPO NZ. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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