The Pro Medicus Ltd (ASX: PME) share price has performed exceptionally for shareholders over the last year, rising 99%. The S&P/ASX 200 Index (ASX: XJO) healthcare stock is also up 342% in the past five years, as shown in the chart below.
Pro Medicus describes itself as a leading healthcare informatics company, providing a full range of medical imaging software and services to hospitals, imaging centres and healthcare groups worldwide. It offers a suite of RIS, PACS, AI and e-health solutions.
It was co-founded by Sam Hupert and Anthony Hall, who are now both billionaires.
The ASX 200 stock doesn't seem anywhere near finished growing.
Strong performance
According to reporting by the Australian Financial Review, Hupert told the newspaper that its success was partly due to the ability to scale the business without relying on debt. He was quoted by the newspaper saying:
At Pro Medicus, we are financially very conservative.
We make profits, pay dividends, have no debt but are still growing at 30 per cent-plus per year. This seems obvious, but you would be surprised how many companies, especially in tech, don't [get this].
Pro Medicus' FY24 first-half result was very promising, with total revenue rising 30.03% to $74.1 million.
That level of revenue growth is very good and justifies a higher valuation than most other businesses.
Its profit margins are incredibly high. The HY24 earnings before interest and tax (EBIT) margin was 66%, one of the highest on the ASX. This high-profit margin means a substantial amount of new revenue gets turned into new profit. HY24 EBIT rose by 31.5% to $48.9 million, while net profit after tax (NPAT) increased 33.3% to $36.3 million.
The company's balance sheet is debt-free and it had $131.5 million of cash and investments (up 8.3%) at December 2023.
The growing dividend sends a lot of the additional profit to shareholders each year. Owners of Pro Medicus shares saw a 38.5% rise in the interim dividend to 18 cents per share.
Ongoing impressive contract wins by the ASX 200 stock
The company keeps winning contracts – its latest announcement revealed five new contracts with a combined minimum value of $45 million. Those contracts ranged between five years to eight years in length. The most rewarding contract on a per-year basis was with Consulting Radiology, a private radiology group in Minnesota.
Pro Medicus revealed that the contracts bring the ASX 200 stock's minimum total contract value (TCV) for new sales this financial year to $245 million.
Pro Medicus share price valuation
According to the forecasts on Commsec, the Pro Medicus share price is valued at 131x FY25's estimated earnings and 102x FY26's estimated earnings. A premium price for a premium business.
