The volatility in ASX stocks has extended to many individual names, including Pro Medicus Ltd (ASX: PME) shares.
Shares in the healthcare imaging software company have plunged more than 9% over the past week, finishing at $124.61 apiece on Wednesday.
Whilst nothing has changed fundamentally for the company in this short time, investors across the board have been jittery in recent days as market volatility creeps in.
Let's delve into the details of what this could mean for Pro Medicus shares.
Why the sudden drop?
The decline in Pro Medicus shares comes alongside volatility in the broader market. The benchmark S&P/ASX 200 Index (ASX: XJO) has slipped from its all-time highs in August and is down more than 3% this past week.
Healthcare shares have shown more resilience, with the S&P/ASX 200 Health Care Index (ASX: XHJ) sliding just 1.7%, but Pro Medicus must have missed that boat of stability. Despite catching a bid in yesterday's session, it remains heavily sold before the open on Thursday.
One of the darlings of the ASX healthcare segment, shares in the imaging software player are up 74%. Prior to this week's volatility, they were up more than 101%.
The company reported robust H1 FY24 results, with revenues up by 30% year over year to $74.1 million.
Net profits also surged by 33%, demonstrating the company's ability to convert revenue growth directly into earnings. These kinds of profits have enabled Pro Medicus to maintain a debt-free balance sheet.
Alas, the cause of the company's share price plunge was not specific to the company but related to broad market sentiment.
Issue is, it just hasn't recovered as quickly as the broad market has.
What's the view on Pro Medicus shares?
Analysts at Goldman Sachs rate Pro Medicus a buy with a $148.00 price target. Goldman predicts another strong performance from the healthcare company in FY24.
It projects revenue growth of 28% and pre-tax earnings to be up by 29%. These figures are slightly ahead of consensus estimates.
The broker is particularly bullish on Pro Medicus due to its leadership in the radiology industry and its strategic expansion into artificial intelligence and cardiology.
It forecasts that Pro Medicus' market share could increase to 13% by FY30, up from the current 7%, as more hospitals adopt its systems.
Meanwhile, according to CommSec, the consensus of analyst estimates rates Pro Medius shares a hold. As such, the view is mixed.
Takeaway
While Pro Medicus shares have experienced a sharp decline recently, the underlying fundamentals of the business haven't changed. Only the market's mood has.
While this is important, so is taking a long-term view. I'd urge investors to keep a close eye on the company's upcoming earnings, which are scheduled for later this month.
Always remember to conduct your own due diligence.
