Pro Medicus Limited (ASX: PME) shares were a great place to invest last year.
The health imaging technology company was one of the best performers on the ASX 200 index in 2024.
Over the period, the ASX 200 tech stock continued to hit record high after record high and ended with a remarkable annual gain of 161%.
This means that if you had invested $10,000 at the end of the previous year, you would have seen your investment grow to $26,100.
But how did we get here? What drove its shares higher? Let's find out.
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Why did Pro Medicus shares smash the market?
Investors were scrambling to buy the company's shares last year after it delivered more explosive sales and earnings growth and announced huge new contract wins.
In respect to the former, Pro Medicus continued its long run of growth, reporting a 29.3% lift in revenue to $161.5 million for FY 2024. This was driven by increased revenue from North America (up 34.4%) and Australia up (5.9%), which offset a 6.7% decline in European revenue. The latter reflects one-off revenue from a sale to a German hospital in the prior corresponding period.
And with Pro Medicus' underlying EBIT margin expanding to 69.5% (from 67.2%), its earnings grew at an even quicker rate. Underlying profit before tax lifted 35.3% to $116.5 million and net profit grew 36.5% to $82.8 million in FY 2024.
Big contract wins
As mentioned above, some major contract wins were announced during the 12 months which gave Pro Medicus shares a further boost.
The largest of those contracts was a whopping 10-year deal signed with Trinity Health that is worth $330 million.
Commenting on the deal, Pro Medicus CEO Sam Hupert, said:
Trinity Health is our largest customer to date and the first with a national footprint. Our initiative with Trinity Health is noteworthy for its scope and scale which will see the Visage 7 platform used by over 650 Radiologists and thousands of clinicians who will benefit from the proven differentiation of Visage 7.
And with its pipeline remaining strong and spanning all market segments, there may be plenty more to come in 2025.
Is it too late to buy?
Goldman Sachs doesn't believe it is too late to buy Pro Medicus shares. It currently has a buy rating and $278.00 price target on them. The broker commented:
PME is not cheap, trading on 114x FY26E EV/EBITDA, but we highlight its revenue/margin outlook, unique cloud offering, and significant long-term opportunity. Additionally, with a focus on the US regulatory outlook, we believe MedTech is increasingly being evaluated as a safe haven within healthcare as it is generally more insulated from impending policy volatility. Our 12m TP is +26% to A$278. Stay Buy.
