The ASX healthcare share Pro Medicus Ltd (ASX: PME) has surged 51% from the low of the US tariff pain in April 2025. But could the healthcare giant still be an opportunity after strong gains?
Pro Medicus describes itself as a leading healthcare informatics company. It provides a full range of medical imaging software and services to hospitals, imaging centres, and healthcare groups worldwide.
It says that its Visage 7 suite of products are the "foundation of an ultra-fast, clinically rich and a highly scalable platform". The company offers radiology information system (RIS), picture archiving and communication system (PACS), artificial intelligence, and e-health solutions, allowing it to offer a comprehensive end-to-end offering in healthcare imaging.
Are Pro Medicus shares a buy?
I'd describe Pro Medicus as one of the very best ASX shares for a few different reasons.
Its software seems to be resonating with its clients because of the number of large contracts it's winning in the US and Europe. That's a great sign that customers are voting with their dollars about which software is the best to use. It's also helpful for shareholders that Pro Medicus is in a defensive sector, providing software to healthcare customers.
Next, the company has a very strong balance sheet, which is another good sign of a quality business. At the end of December 2024, it had no debt and a cash and other financial assets balance of $182 million.
Another great sign of the company's quality is the exceptionally high operating profit (EBIT) margin. In the FY25 half-year result, Pro Medicus reported an EBIT margin of 71.9%, which is wonderful for an operating business. This means a very significant amount of new revenue turns into net profit for the company. Investors usually value a business on how much profit it's making now and could make in the future.
Valuation
That's the key question – how much net profit can it make in the future? Pro Medicus shares are priced so highly because the company's net profit is predicted to rise exceptionally. According to Commsec, the business is predicted to make earnings per share (EPS) of $1.11 in FY25, and this could grow by 121% over the next two years to the 2027 financial year.
Not many large businesses are predicted to more than double their net profit in the next couple of years. However, not many businesses are trading at 109x FY27's estimated earnings, either.
It looks like Pro Medicus shares are valued very expensively based on their near-term earnings. However, investing is about the long-term, and it's very possible that the company's profit could grow stronger than expected in the medium-to-long term, which could make the price-earnings (P/E) ratio for FY27 and beyond seem more reasonable. If the company is able to continue growing at a strong pace, particularly after FY27, then it could justify the rise of the Pro Medicus share price.
