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.
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.
