Pro Medicus Ltd (ASX: PME) shares have been one of the great wealth creation stories of the modern Australian share market.
However, despite this, the health imaging software company has watched roughly half its market value disappear over the past 12 months.
As a result, investors who bought near the peak is nursing a very painful loss.
But zoom out far enough and the picture changes completely: a decade of ownership tells a wildly different story.
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How Pro Medicus shares turned $5,000 into a small fortune
Ten years ago, in July 2016, Pro Medicus shares changed hands for roughly $5.00 apiece.
At that time, the company was a promising but largely unknown Melbourne software business.
Its Visage 7 platform had won a handful of United States contracts and not much else, and as a result, most Australian investors had never heard of it.
Today those same shares trade near $160 following last week's brutal healthcare sell-off.
A $5,000 investment made back in July 2016 would have bought around 1,000 shares, worth approximately $160,000 today, a gain that works out at roughly 3,100% before dividends are counted.
On the subject of dividends, Pro Medicus has paid fully franked dividends across the entire period, so an investor who reinvested those payments would be sitting on more again.
The most recent earnings result
Pro Medicus released its half-year results for the six months to 31 December 2025 in February.
Revenue from ordinary activities came in at $124.8 million, up 28.4% on the prior corresponding period. Underlying profit before tax rose 29.7% to $90.7 million, driven by underlying EBIT margins that expanded again, climbing from 72% to 73%.
As a result, reported net profit after tax leapt 230.9% to $171.2 million.
That headline figure was heavily flattered by a $149.1 million unrealised gain on the company's stake in 4D Medical Ltd (ASX: 4DX), yet encouragingly, Pro Medicus closed the half with $221.8 million in cash and financial assets and no debt whatsoever.
Management also signed more than $280 million in new contracts during the six months, headlined by a $170 million deal with University of Colorado Health.
Chief executive Dr Sam Hupert noted that the company made "more sales in this half than we used to make in a full year" just two years earlier.
Why Pro Medicus shares have fallen so far
Two major forces have driven the de-rating in Pro Medicus shares.
The first is valuation. The stock was priced close to perfection after nearly doubling in FY25, which left no margin for error.
The second is artificial intelligence. The market has grown nervous that AI could eventually erode the competitive moat around specialist medical imaging software.
February's result did little to settle those nerves, with first half revenue landing modestly below consensus expectations.
The broader sector has offered no shelter either. ASX healthcare shares slid for six consecutive sessions last week after the United States announced fresh tariffs on 60 trading partners.
Foolish takeaway
Pro Medicus shares still trade on a demanding earnings multiple, and the artificial intelligence question is continuing to weigh on the share price.
However, it is important to look past these seemingly short-term considerations. An investor who bought in 2016 and held through every dip would be very happy today.
An investor who sold during the wobble in 2018, or 2022, or last month, would not.
The lesson is that truly great compounding machines almost never feel comfortable to own.
