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Does MM like Pro Medicus (PME) at current levels?

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Does MM like Pro Medicus (PME) at current levels?

Good morning guys, I have been a happy investor in Pro Medicus for a few years now. Most analysts I've heard talking about PME praise the business and its performance, but also flag the valuation is too high. I have thought about taking some profits, but the stock seems well supported above $59, making it way more expensive (relative to my entry point) to rebuild the weight I currently have of PME in my portfolio. So my question is, what are the risks to PME's valuation that could precipitate a fall beyond $59 in 2023? Thanks


Hi Angela,

Congratulations for staying long PME when it often looked expensive &/or tired on the upside, its already up +20% in 2023 alone. Only 9% of analysts that cover the stock have it as a buy which illustrates how the valuation is scaring off investors but as we keep saying 2023 has been characterised by “the strong keep getting stronger”.

Consensus estimates has revenue increasing by 22% in FY24 which does make it hard to justify the current Est. valuation of 135x but the company develops and supplies proprietary software & IT solutions to large medical companies i.e. a “hot sector” at present. We find it difficult to start buying at current levels although break to new highs above $70 looking inevitable, if we were long our consideration would be whether to tweak the position down slightly but at this stage the stock looks great.

The risks are obviously around execution, and specifically around growing the top line while also growing their margins as they continue to scale, which drives the outsized earnings growth. Left field competition is also a risk factor that should always be considered, they operate in a dynamic space.

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Pro Medicus Ltd (PME)
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