Could Pro Medicus Ltd (ASX: PME) be the best ASX share after the medical imaging healthcare company released its FY21 result?
Pro Medicus FY21 result
Pro Medicus reported that revenue increased by 19.5% to $67.9 million. On a constant currency basis, if exchange rates hadn’t changed, revenue would have increased by 30.2%.
All three key regions saw good double digit revenue growth with North American growth of 18%, Australian growth of 23.4% and European growth of 25.7%.
The revenue is being driven after winning a number of large contracts in recent times. For example, it won a $40 million, 7-year deal with Intermountain Healthcare and a $31 million 7-year deal with the University of California.
The rise of revenue and operating leverage of the business saw underlying profit before tax increased 41% to $42.6 million (or 56.3% in constant currency).
Reported net profit grew 33.7% to $30.9 million.
During the year, it also signed research collaboration agreements with NYU Langone Health
and Mayo Clinic. Pro Medicus described these two organisations as two of the most prestigious academic healthcare institutions in North America. The agreements provide a framework for collaboration to facilitate development and commercialisation in the field of AI, leveraging its platform.
Dividend and balance sheet
The company remains debt free. Its cash and other financial assets increased by 42.4% to $61.8 million.
The Pro Medicus board decided to declare a final dividend of 8 cents per share (up 33%), bringing the full year dividend to 15 cents per share (up 25%).
Outlook for Pro Medicus and the share price
Pro Medicus said that more clients were choosing to buy multiple products, the CEO expects this trend to continue.
The healthcare ASX share said that whilst it had a great year for winning contracts, its pipeline remains very healthy both in terms of quality and quantity. Pro Medicus revealed that there is a good mix across the spectrum of opportunities. Some are cloud, some are on-premise, some academic and some in the non-academic IDN space, as well as the for-profit and private sector.
It has a very high EBIT (EBIT explained) margin, though time will tell how high above 50% the EBIT margin will settle at after this strange COVID period of time.
I think Pro Medicus is one of the very best ASX growth shares around. However, the question is valuation.
Using CommSec’s earnings estimate for the 2022 financial year, Pro Medicus is valued at 142 times forward earnings. It’s definitely worth a sizeable premium to most ASX shares, and investors shouldn’t get too hung on the valuation for great businesses, but that seems eye watering for a new buyer today. But I’d be very happy if I were already a shareholder.
