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The Pro Medicus Ltd (ASX:PME) share price is down, but is PME a BUY?

The Pro Medicus Ltd (ASX: PME) share price has been falling these past few months despite announcing some big wins. Indeed, investors are asking, is the PME share price is a buy?

The Pro Medicus Ltd (ASX: PME) share price has been falling these past few months despite announcing some big wins. Indeed, investors are asking, is the PME share price is a buy?

This week, PME announced its latest all-cloud, usage-based implementation of Visage 7 Viewer and Visage 7 Workflow.

The $28 million, 7-year deal with Allina Health in Minnesota follows a $32 million, 8-year deal with Inova Health in Northern Virginia. Together, these follow some massive wins from the first half of FY22, including the $40 million cloud deployment with Novant Health.

Source: Pro Medicus HY22 report

Including renewals, which I suspect will all but certainly occur, Pro Medicus is now tracking on more than ~$400 million in banked revenue over the next five years, with obvious upside from the usage-based fees and more wins.

While Pro Medicus shares have fallen recently, as can be seen above, the reality is shares are still expensive. At an estimated $95 million of revenue this financial year, the company’s shares are trading at an enterprise value to sales ratio (EV/S) of 44x.

Assuming ~22% revenue growth over the next five years will result in ~$215 million of revenue. Assuming a more conservative (but still aggressive) price-to-sales ratio of 20x would value the company at $4.3 billion — almost exactly the current market cap and share price.

I’m confident Pro Medicus will achieve a revenue CAGR in the high teens to mid-twenties per cent range, but I’m not confident a 20x sales multiple will hold up over the entire period. So I’d rather wait for sentiment to fall before dipping back in. Alternatively, if the company’s foray into AI or breast begins to bear fruit I’ll take a second look.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

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Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of writing Owen owns shares of Pro Medicus.
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