The Pro Medicus Limited (ASX:PME) share price has risen 56.5% since the start of 2024. Also in 2024, the Washington H Soul Pattinson & Company Ltd (ASX:SOL) share price is 3.9% away from its 52-week high. This article explains why it could be worth popping PME and SOL shares on your watchlist.
PME share price in focus
Founded in 1983, Pro Medicus is a provider of radiology IT software for hospitals, imaging centres and health care groups worldwide.
The Pro Medicus suite of products centre around radiology information systems (RIS), Picture Archiving and Communication Systems (PACS), and advanced visualisation solutions. These products support everything from patient scheduling and billing to fast medical imaging interpretations and analysis.
The company’s value proposition partly lies within its flagship Visage software which allows radiologists to view large image files generated by X-rays remotely on mobile devices. This allows diagnostic decisions to be made on-the-go and ideally improves patient outcomes.
While it may be large, Pro Medicus Limited is a growth stock, and so it requires a different set of rules and may not be straightforward to value at times. Studies have shown that over 5-10+ years, it’s top-line revenue growth which explains a stock’s performance. That’s why it’s good to see Pro Medicus Limited is able to grow revenue at 33.4%, a strong clip.
SOL shares
Founded in 1903, Washington H. Soul Pattinson (WHSP) is an investment company with a diversified portfolio of assets across a range of industries and asset classes.
Some of SOL’s largest holdings include stakes in other well-known publicly listed companies such as TPG Telecom (ASX: TPG), New Hope Group (ASX: NHC) and a cross-shareholding in Brickworks (ASX: BKW).
SOL’s mission is to deliver superior returns to its shareholders by creating capital growth and steadily increasing dividends as a holding company. It’s the second-oldest publicly listed company on the ASX and has a strong track record of capital growth and dividends. In fact, it’s never missed a dividend payment since listing in 1903! It should be thought of as a family-run LIC, for the benefit of all shareholders (who are deeply aligned).
PME share price valuation
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As a growth company, one way to put a general prediction on the PME share price could be to compare its price-to-sales multiple over time. Currently, Pro Medicus Limited shares have a price-sales ratio of 97.51x, compared to its 5-year average of 85.76x, meaning its shares are trading higher than their historical average. Please keep in mind that context is important – and this is just one valuation technique. Investment decisions can’t just be based on one metric.
Since it is a more of a ‘blue chip’ company, we could look at the dividend yield of SOL to determine its value. SOL is offering a historical dividend yield of around 2.52%, which compares to its 5-year average of 2.52%. The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets. Both of these models would be a better way to value the SOL share price.
