The Pro Medicus Ltd (ASX: PME) share price has been absolutely smashed on Thursday.
At the time of writing, the health imaging technology company's shares are down 21.94% to $132.29. That leaves the stock down roughly 40% so far in 2026 and back to levels not seen since August 2024.
So, what on earth is going on?
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Record numbers, but expectations were sky high
For the six months ended 31 December, Pro Medicus reported:
• Revenue up 28.4% to $124.8 million
• Underlying profit before tax up 29.7% to a record $90.7 million
• Underlying EBIT margin expanding to 72.6%
• Interim dividend of 32 cents per share, fully franked
Statutory net profit after tax (NPAT) surged to $171.2 million, though that included unrealised gains from its investment in 4DMedical.
The company delivered solid growth across its key financial metrics. Revenue and profit both increased at close to 30%, margins expanded further, and the company continued to secure large North American contracts.
However, the scale of the sell-off suggests expectations were elevated heading into the result.
Pro Medicus was already trading on a premium valuation prior to the release, leaving limited room for any disappointment.
Management also highlighted that its largest implementation during the period went live late in October, which limited its financial contribution for the half.
Technical pressure builds after results
At a heavily discounted price of $132, Pro Medicus still commands a market capitalisation of around $13.8 billion.
The business remains capital light, generates strong margins, and has more than $1 billion in contracted revenue over 5 years. North America remains a significant growth opportunity, with Visage 7 positioned to support AI-driven workflows.
However, the chart has weakened materially.
The sell-off pushed the stock below recent support near $150, which failed to hold following the result.
At current levels, the shares are trading back at prices last seen in August 2024 and have retraced a large portion of their prior uptrend.
Momentum indicators have weakened materially. The relative strength index (RSI) has moved toward oversold territory, reflecting sustained selling pressure.
Buy the dip or value trap?
The key question is whether this move reflects short-term volatility or the beginning of a broader de-rating.
Revenue, margins, and contracted revenue continue to trend higher. The company remains highly profitable and cash generative.
However, the price investors are willing to pay for those earnings has clearly fallen.
Some may see the drop as a chance to buy a quality business at a lower price. Others may wait to see if the selling pressure eases before making a move.
Whether this proves to be attractive will depend on how quickly recent contract wins translate into stronger earnings over the next 12 to 24 months.
