Periods of market volatility often feel uncomfortable.
Entire sectors can fall out of favour, sentiment can turn quickly, and even high-quality ASX shares can be swept up in the sell-off.
That has certainly been the case for many software businesses over recent months, as concerns around valuation and the disruptive potential of artificial intelligence have weighed heavily on the sector.
Against that backdrop, some well-regarded names are now trading close to their 52-week lows. Two that stand out are TechnologyOne Ltd (ASX: TNE) and Pro Medicus Ltd (ASX: PME). Both have seen their share prices fall sharply from last year's highs, despite continuing to report solid underlying business performance.
Image source: Getty Images
Technology One
Technology One is a long-established Australian software company that provides enterprise resource planning (ERP) solutions to government, education, and large corporate customers. Its software helps organisations manage core functions such as finance, human resources, and asset management, with a growing focus on cloud-based delivery.
The company has spent more than a decade transitioning customers from on-premise software to its proprietary cloud platform. This shift has driven more predictable, recurring revenue and has improved long-term visibility over cash flows. Technology One has also built a reputation for disciplined execution, consistently delivering revenue growth and strong margins.
Despite these strengths, the Technology One share price is down more than 30% from its peak and remains close to recent 52-week lows. Like many software businesses, it has not been immune to a broader de-rating of the sector. Investors have become more cautious about growth stocks, particularly those trading on higher earnings multiples, even when fundamentals remain intact.
For long-term investors, the key question is whether this pullback reflects a deterioration in the business, a reset in valuation expectations across the market or a great buying opportunity.
Pro Medicus
Pro Medicus operates in a very different niche, but has faced similar share price pressure. The company develops high-end medical imaging software used by hospitals and healthcare providers around the world. Its flagship Visage platform enables radiologists to view and analyse large imaging files quickly and efficiently, supporting better clinical decision-making.
Over recent years, Pro Medicus has delivered exceptional growth, driven by major contract wins in the United States and ongoing global expansion. The business is capital-light, highly profitable, and benefits from long-term customer contracts that create sticky, recurring revenue streams.
Even so, Pro Medicus shares are down more than 40% from last year's highs and are hovering near 52-week lows. Part of this reflects the company's premium valuation following a long period of outperformance. Broader concerns around healthcare spending cycles and the sustainability of high growth rates have also weighed on sentiment.
As with Technology One, the market is questioning how much investors should be willing to pay for quality growth, even when long-term drivers remain in place.
A classic quality-versus-sentiment test
History shows that some of the best long-term opportunities can emerge when high-quality businesses are caught in sector-wide sell-offs. At the same time, not every falling share price represents value. Sometimes lower prices signal that expectations were too optimistic, or that competitive and structural challenges are emerging.
For investors watching Technology One and Pro Medicus, the task is to separate short-term noise from long-term reality. Are these share prices reflecting temporary pessimism toward software stocks, or a more permanent shift in how the market views growth and valuation?
Either way, periods like this can be a useful reminder. When entire sectors get pummelled, it is often wise to revisit proven businesses, reassess the fundamentals, and decide whether today's prices are offering opportunity — or a warning worth heeding.
