Two of the ASX's former market darlings have been brutally sold off over the past year.
Pro Medicus Ltd (ASX: PME) and Xero Ltd (ASX: XRO) have both fallen a long way from their highs, as investors have moved away from expensive growth shares.
But after such large declines, I think both stocks are starting to look very interesting again.
At the time of writing, the Pro Medicus share price is down $128.25. That leaves the medical imaging technology stock down almost 50% over the past year.
Xero shares are trading at $83.43 at the time of writing. The accounting software company has now fallen by around 52% over the past 12 months.
Those steep declines would normally cause investors to panic. But I think this may have created two very attractive buying opportunities in May.
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Pro Medicus still has high-quality growth
Pro Medicus has been one of the ASX's best healthcare technology businesses for years.
The company provides medical imaging software to hospitals, radiology groups, and healthcare networks. Its Visage platform helps manage large volumes of medical imaging data, making it a critical tool within large healthcare systems.
The sell-off has been driven partly by valuation concerns. Pro Medicus was priced for near-perfect growth when the share price was above $300 last year. However, after such a large fall, investors are now getting a much better price for a business that is still delivering strong numbers.
In its HY26 result, Pro Medicus delivered revenue of $124.8 million, up 28.4% year on year. Underlying profit before tax rose 29.7% to $90.7 million, helped by a very high EBIT margin of 73%.
The company has also kept winning major contracts. Recent deals include a 5-year $23 million contract with the University of Maryland Medical System and a 5-year $37 million contract renewal with Northwestern Medicine.
Broker views also remain positive. Recent data shows Morgan Stanley has a $210 price target, while Bell Potter has a $226 target. Based on the current share price, that points to potential upside of about 64% and 76%, respectively.
Xero's sell-off looks overdone
Xero has had an even rougher year on the share market.
Investors have been worried about slowing software growth, valuation, and whether artificial intelligence (AI) could disrupt accounting platforms.
And that is a fair concern. But Xero is not some fringe software product that can be easily replaced.
Its platform is used for accounting, payroll, payments, tax, invoicing, and cash flow tools. Once a business and accountant are both using Xero, switching can be a hassle.
The latest half-year result showed subscribers up 10% to 4.6 million. Operating revenue rose 20% to NZ$1.19 billion, while net profit after tax (NPAT) jumped 42% to NZ$135 million.
That tells me the business is still growing well, even as the share price says otherwise.
CMC data also points to upside. The average target across recent analyst ratings is $121.78, implying a possible rise of around 46% from the current share price.
