Pro Medicus Ltd (ASX: PME) shares may be the single best thing an ordinary Australian investor could have owned over the past decade.
The medical imaging software company was a modest small-cap in 2016.
It is now a business worth close to $18 billion.
The share price has fallen 39% over the past twelve months, however, this hasn't seemed to have impacted the long-term picture much.
Here is exactly what $10,000 would have become.
Image source: Getty Images
The maths on Pro Medicus shares over a decade
Pro Medicus shares traded at roughly $5.00 a share through the second half of 2016.
A $10,000 investment would have bought around 2,000 shares.
Those shares closed on Tuesday at $173.15.
The initial investment is now worth approximately $346,000. That is a gain of close to 3,360% before dividends.
Speaking of, dividends improve the number again.
Pro Medicus has paid a fully franked dividend across the entire period.
To illustrate, the FY26 payout alone came to 69 cents per share.
Measured against the original $5.00 purchase price, that single year of income represents almost 14% of what the investor paid back in 2016.
What actually drove the returns
The business did the work, not the market.
Visage is the platform radiologists use to view, store and share medical images.
The platform wins long contracts with large North American hospital networks, and it keeps them.
Revenue has compounded relentlessly while margins widened as the company scaled.
That combination is rare anywhere on the ASX and close to non-existent in healthcare.
Inside the FY26 result
FY26 was another strong year by almost any measure.
Revenue rose 22.9% to $261.7 million and underlying EBIT climbed 24.4% to $196.1 million.
Underlying net profit after tax increased 24.1% to $144.7 million.
Reported net profit jumped 130.3% to $265.3 million.
The company signed ten new contracts worth more than $407 million, including a ten-year agreement with UC Health Colorado.
Six existing contracts were renewed on five-year terms at higher fees.
Cash and financial assets grew 19.7% to $252.3 million, and the balance sheet still carries no debt at all.
Chief executive Dr Sam Hupert was satisfied with how the year finished.
We were aiming for 30% increases in EBIT and NPAT, and we exceeded both on a constant currency basis.
Why Pro Medicus shares have fallen 40% anyway
None of that stopped the share price falling hard.
Pro Medicus shares have dropped from a 52-week high of $321.57 to $173.15. The stock still trades on a price-to-earnings ratio of roughly 67.
That is a high multiple, and it leaves no room for a slower quarter of contract announcements.
Anyone who bought at the high is down more than 45%, which shows how important timing can be.
The valuation question facing new buyers
Buying a wonderful business at any price is not a strategy.
Pro Medicus needs to keep growing near 25% a year to justify what the market pays for it.
The addressable market in North American radiology is large, though it is not infinite.
Competition from larger imaging vendors is there, and contract timing is lumpy by nature.
Foolish takeaway
A $10,000 parcel bought a decade ago is worth around $346,000 today, not including dividends, which is a life-changing outcome from a very ordinary sum of money.
The lesson is not that Pro Medicus shares were an obvious buy in 2016, because they were nothing of the sort.
I would not chase the stock at 67 times earnings today.
But I would also not sell away a decade of compounding simply because the share price has had a difficult twelve months.
