ASX 200 healthcare stock Pro Medicus Limited (ASX: PME) reached a new all-time high of $113.93 per share on Friday.
Pro Medicus shares closed at $113.52 yesterday, up 1.27%. The medical imaging company has had an incredible run over the past year, with its share price rising 88.5%.
And top broker Goldman Sachs reckons this ASX 200 healthcare share has got further room to run.
The broker has a buy rating on Pro Medicus shares with a 12-month price target of $134, implying a potential 18% upside for investors who buy today.
'Best in class tech'
Goldman Sachs describes Pro Medicus as having "best in class tech in a growth market with artificial intelligence (AI) upside".
Pro Medicus provides sophisticated software enabling radiologists and doctors to view high-quality medical images remotely or in their offices.
Demand for medical imaging is growing, especially as the world's population ages and medical advancements enable better testing.
On top of that, a shortage of radiologists means healthcare companies are keen to adopt technology that enables them to hire radiologists in remote locations, or those working from home, to read tests.
Goldman says Pro Medicus' flagship radiology product, Visage 7, has become a core product for many healthcare institutions.
In a new note published this week, Goldman said:
We believe Visage 7 is core to many healthcare institutions given its distinct speed and cloud capabilities, and we forecast the company to gain market share from c7% today to 13% by 2030E.
The broker is also positive on this ASX 200 healthcare share because of the market's AI upside.
In another note, Goldman explained the impact of AI in the medical imaging space:
AI opens an incremental US$620mn TAM today (growing at a +34.7% CAGR) with radiology receiving the majority (c.80%) of recent FDA AI algorithm clearance.
We believe PME is well positioned to take share as the incumbent viewing platform across many large, and likely early adopters of new technology.
PME is generating revenue from its Visage breast density AI algorithm … today, and we see the potential value for AI to be significant with adoption driven by improved accuracy and clinical outcomes.
We forecast AI to comprise 9% of PME's revenue by FY30E (from <1% in FY25E), with upside if PME achieves faster AI attach penetration, higher price per scan, and a greater proportion of algorithms developed in-house where no royalties are paid to a partner.
Pro Medicus continues to expand
Pro Medicus has won many long-term contracts with major healthcare institutions around the world, and as it continues to expand, so does its earnings.
In its 1H FY24 results, Pro Medicus revealed a 30.3% increase in revenue to $74.1 million and a 33.3% lift in net profit to $36.3 million.
The company also had $131.5 million in cash and other financial assets as of 31 December, up 8.3%.
During the half, Pro Medicus won four new key contracts worth a total of $200 million. The contracts have committed minimum exam volumes and terms ranging from seven to 10 years.
ASX 200 healthcare share snapshot
Pro Medicus moved into the ASX 100 during the S&P DJI March quarterly rebalance.
The ASX 200 healthcare share has risen 478% over the past five years.
