The Pro Medicus Limited (ASX: PME) share price has been on fire in 2023.
Since the start of the year, the ASX 200 tech share has risen approximately 23%.
Where next for this ASX 200 tech share?
The good news for investors is that analysts at Goldman Sachs don't believe it is too late to buy Pro Medicus shares.
According to a note, the broker has upgraded the company's shares to a buy rating with a $76.00 price target.
Based on the current Pro Medicus share price of $67.94, this implies a potential upside of 12% for investors over the next 12 months.
What did the broker say?
The broker has been impressed with the health imaging technology company's recent contract wins and feels there could be more coming. It highlights that "Visage 7 looks set for a robust period of transaction revenue as PME on-boards several large accounts."
This is underpinned by the "growing importance of a radiology IT system that can materially improve efficiency" and the "competitive advantage of PME's offerings."
Goldman acknowledges that this ASX 200 tech share is not cheap on paper. However, it believes it deserves to trade at a premium. This is due to its highly profitable business, strong growth potential, and robust balance sheet.
On our estimates, PME currently trades on 63x NTM EV/EBITDA (noting we are +13-14% above EBITDA consensus in FY24/25E after incorporating the latest contract wins). Whilst it doesn't look cheap on near-term multiples: i) the business is highly profitable (>50% net margins); ii) cash flows are recurrent/long-dated in nature (5/7-year contracts); and iii) the balance sheet looks robust ($80m net cash).
Our new estimates imply a +22% EBITDA CAGR (FY23-26E), a 'multiple to growth' ratio of 2.9x, which we view as undemanding vs. ASX Healthcare on 2.2x. We view PME as the clear incumbent technology leader in a growth market with low-risk market share upside from <10% today, and the optionality to broaden/deepen into a platform solution for adjacent/complementary offerings. We upgrade to Buy.
All in all, Goldman appears to believe this could be one tech share to buy and hold.
