Stock: Pro Medicus
Symbol: PME
Exchange: ASX
Financial Year-end: 30 June 2018
Latest price: $8.07
Date: July 19, 2018
Company Profile
Pro Medicus Ltd provides radiology information systems (RIS), picture archiving and communication systems (PACS), and advanced visualization solutions to hospitals, imaging centres and health care groups worldwide.
Its Visage product line comprises solutions for RIS (Radiology Information Systems) /Practice Management, Healthcare Imaging and e-health. These systems can be used either individually or in combination by radiologists and other medical imaging professionals to interpret images created by medical imaging equipment such as X-Ray and Ultrasound machines and CT and MRI Scanners and communicate the results to their referring clinicians.
The company has offices in Melbourne, Berlin and San Diego.
Competitors
About 70% of sales are in the USA where the company competes with big names like Siemens, Fuji and Phillips.
Improving margins and big name contracts such as the Mayo Clinic in the US and Primary Health and I-Med in Australia suggest that the company is able to compete effectively.
Financial performance
Margins
Operating margins declined from 2011 to 2013, along with revenues but have steadily recovered to 49.04 for the 12 months to 31 December 2017 (TTM).
Net income margin has recovered to a healthy 29% of revenue.
Revenue Growth
Revenue growth recovered, after falling 2011 – 2013, to average 14.7% compound growth since 2018. Annual growth in the range of 15% to 20% is expected.
From 31 Dec 2017 Directors Report: “….the Company continued to make strong inroads into the North America market winning a key $18.0m contract with Yale New Haven Health, one of the most recognised health systems in North America.”
The vast majority of the company’s contracts are now transaction-based “pay per view” which increases the appeal to smaller practices and locks in future growth for the company as revenues grow in line with client revenues.
Earnings per share
Earnings per share is expected to grow faster than revenue due to improving margins and economies of scale.
Capital structure
Cash reserves were $22.80m at 31 December 2017 and the Company remains debt free.
Weaknesses
Future growth depends on the company’s ability to maintain its competitive position.
International profits are also vulnerable to foreign exchange fluctuations.
Valuation
Price/Earnings is high at 66.5 based on expected 2018 earnings of 12.1 cents. With a gross dividend yield of 0.62% that implies revenue growth at the top of the expected range (20%) while operating costs continue to grow at 8%.
Technical Analysis
Price peaked at $9.00 in January 2017 and has consolidated above support at $7.00. 50-Week Twiggs Momentum is again rising after a low of 67.3% in May 2018 backed up by 50-week Trend Index holding above zero since July 2012.
On the daily chart, Twiggs Trend Index (21-day) flags a fresh entry point with a 0.2% upward reversal.
Conclusion
BUY (July 23, 2018)
Disclosure
Staff of The Patient Investor may directly or indirectly own shares in the above company.