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Looking for an ASX growth share? Try the Pro Medicus Limited (ASX:PME) share price

The Pro Medicus Limited (ASX:PME) share price is up 62.2% since the start of 2024. It's probably worth asking, 'is the PME share price undervalued?'
The Pro Medicus Limited (ASX:PME) share price is up 62.2% since the start of 2024. At the same time, the Washington H Soul Pattinson & Company Ltd (ASX:SOL) share price is 8.4% away from its 52-week high. This brief article explains why it could be worth adding PME and SOL shares to your ASX investing stock 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.

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

As a growth company, one way to put a rough calculation 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 101.57x, 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 2.65%, 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.

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With bond ETFs like ASX:IAF and the S&P 500 riding high, now could be one of the best times to start earning passive income from a portfolio of shares and ETFs.

In this free analyst report, our Chief Investment Officer, Owen Rask, names 10 ASX stocks and ETFs to watch.

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