Pro Medicus Limited (ASX: PME) shares were on fire on Tuesday despite the market weakness.
The health imaging technology company's shares stormed 12% higher to a record high.
Investors were scrambling to get hold of its shares after it announced a massive $140 million contract win. The 10-year contract is with Baylor Scott & White Health (BSWH), which is the largest not-for-profit healthcare system in Texas and one of the largest in the United States.
This latest gain means that Pro Medicus shares are now up over 50% since this time last year.
Can Pro Medicus shares keep rising?
The good news is that Goldman Sachs doesn't believe it is too late to invest.
According to a note, the broker has responded to the company's news by reiterating its buy rating with an improved price target of $88.00.
This implies a potential upside of approximately 10% from current levels.
What did the broker say?
Goldman notes that this contract is the largest it has won to date. Importantly, it highlights that the $140 million figure marks the minimum revenue that it would generate over the term, set at a level below the customer's current volumes.
The broker also sees scope for add-ons (AI or cardiology) that could boost revenue even further in the future.
Commenting on the significance of the deal, it said:
The transaction is significant for a number of reasons: (1) the minimum annualised value of A$14.0m/year is 5.4x the historical average contract size, reminding of the size of the future revenue opportunity (after BSWH, we believe PME operates at c.10% share of US radiology volumes and with limited reason to doubt further material upside from here); (2) it continues to demonstrate PME's compelling product offering/value proposition to a broadening range of customers across different sizes/specialties/regions (a key component of our Upgrade to Buy in July); and (3) BSWH represents PME's first major client in Texas, and hence provides a platform for further growth (direct validation/referral effect across both the state and the country).
We view PME as the clear incumbent technology leader in a growth market with low-risk market share upside from c.10% today, and the optionality to broaden/deepen into a platform solution for adjacent/complementary offerings.