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 simple 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 good clip.
WES shares
Founded in 1914, Wesfarmers is an Australian conglomerate headquartered in Perth. Its main operations span Australia and New Zealand and include retail, chemical, fertiliser, industrial and safety brands and products.
Wesfarmers is a bit like a publicly listed private equity company. It has a long history of buying businesses, benefitting from their cash flow, re-investing in them and then selling them for a more attractive price. A good example of this might be Coles Group, which it bought in 2007 and spun out in 2018. However, by far (over 50%) of the company’s operating profit comes from Bunnings, the #1 hardware and home improvement business in Australia. Wesfarmers originally invested in Bunnings in 1987, buying the final 52% in 1994 for $594 million.
Wesfarmers has long been considered a leading blue chip stock on the ASX and is known for paying a consistent dividend. Other household names owned by Wesfarmers include Blackwoods, Kmart, Target, Officeworks, and Priceline Pharmacy.
PME share price valuation
As a growth company, one way to put a rough forecast 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 120.76x, compared to its 5-year average of 82.69x, meaning its shares are trading higher than their historical average. This could mean that the share price has increased, or that sales have declined, or both. In the case of PME, revenue has been growing over the last 3 years. 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 WES to determine its value. WES is offering a trailing dividend yield of around 2.85%, which compares to its 5-year average of 3.36%.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 WES share price.”)
