At the current Pro Medicus Ltd (ASX: PME) share price, is it a high-flying opportunity right now?
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What does Pro Medicus do?
The key offering of Pro Medicus is its Visage Imaging business, which is a global provider of enterprise imaging solutions that enables picture archiving and communication systems (PACS) replacement with local, regional and national scale.
The Visage platform can be delivered entirely from the cloud or on the premise. It enables diagnostic, clinical, specialty, research and mobile imaging workflows from a singular platform.
Its systems can also be used for streamlining medical practice management. That includes medical accounting, clinical reporting, appointments, scheduling, marketing and management information applications.
How have things been going recently?
The medical technology business has been rapidly winning major contracts which is likely to drive revenue and profit for a number of years.
In the six months to 31 December 2020, Pro Medicus saw revenue growth of 7.8% to $31.59 million. Net profit increased 12.4% to $13.54 million. Underlying net profit before tax went up 25.9% to $18.76 million.
The business remains debt-free and its profit margins continue to grow. The cash reserves went up $7.53 million to $50.93 million. Pro Medicus' board decided to increase the final dividend by 16.6%.
Thanks to all of the contract wins in recent times, the business is expecting an incremental step up in exam volumes in the second half of FY21 as those sites come online. Pro Medicus is expecting a major step up in FY22.
At the time of the HY21 result release it had won six out of six major contracts in its industry, across both academic and non-academic spaces.
Pro Medicus says its pipeline is still healthy and it's benefiting from the network effect generated by its growing customer base.
The latest win
Earlier this month, Pro Medicus revealed an 8-year, $14 million deal with The University of Vermont Health Network where Visage will replace multiple legacy PACS. This deal extended the company's US academic institution footprint. It's a transaction-based model with potential upside.
Planning for the rollout commenced immediately and initial go-lives are targeted for the second half of the calendar year.
Pro Medicus CEO Dr Sam Hupert said:
We continue to build momentum in the market with this, our seventh contract win in a row, adding to other recent major announcements. UVM Health Network is the fourth of these to opt for a cloud-based solution, a trend we see increasing rapidly amongst healthcare systems in North America.
Our pipeline continues to grow. Visage 7 with its proven cloud-native capability provides us with a significant strategic advantage that enables us to address these opportunities across a growing segment of the market both in North America and other regions.
Is the Pro Medicus share price an opportunity?
Since 5 August 2020, the Pro Medicus share price has almost doubled after the effects of COVID-19.
The broker UBS recognises that Pro Medicus is winning important contracts and that it has a much better offering compared to competitors.
However, UBS currently rates Pro Medicus as a hold with a price target of $46. At the current Pro Medicus share price, it thinks it's valued at 121x FY22's estimated earnings.
