The Pro Medicus Ltd (ASX: PME) share price is still a buy according to fund manager Ben Griffiths from the funds management business Eley Griffiths Group.
Why Eley Griffiths is worth listening to
Eley Griffiths runs two funds, The Small Companies Fund and The Emerging Companies Funds.
The Small Companies Fund targets businesses outside of the S&P/ASX 100 Index (ASX: XTO). After fees, it has outperformed the S&P/ASX Small Ord Accumulation Index by an average of 4.2% per annum since inception in September 2003.
What's Pro Medicus?
It's a business that is a health imaging technology provider, predominately in the radiology software and services space for hospitals, imaging centres and health care groups worldwide. It offers an end-to-end offering with its Visage technology.
Fund manager Ben Griffiths explained on Livewire Markets that radiologists and other medical imaging professionals use Visage to interpret images created by medical imaging equipment such as X-Ray, Ultrasound, CT and MRI Scanners.
Why does Eley Griffiths think that the Pro Medicus share price is an opportunity?
The fund manager said that its research shows that Pro Medicus is significantly ahead of its peers when it comes to viewer speed and efficiency for clinics.
One of the highlights for Mr Griffiths is that the healthcare ASX share has been winning contracts worth $155 million in the financial year to date. This has been much stronger than FY19 and FY20 where the wins amounted to around $50 million per annum in those years.
Since 31 December, Pro Medicus has won some very big contracts. One is a 7-year, $40 million contract with US-based Intermountain Healthcare, which operates in the mountain states of Utah, Idaho and Nevada. It also won a 7-year, $31 million contract with a leading Californian academic health system.
The valuation of Pro Medicus is high, according to Eley Griffiths.
However, it's expected to have 20% compound revenue growth over the next five years. Mr Griffiths noted that Pro Medicus could have earnings before interest and tax (EBIT) margins of around 60% – he said it's in "rarefied air".
One of the other things that the fund manager noted was that Pro Medius has a very high return on invested capital (ROIC) compared to most other ASX shares.
Eley Griffiths is particularly excited by the fact Pro Medicus has plenty of ways that it can invest its capital whilst it wins more market share and attract more customers with an even stronger software offering.
