Why are PME & PNI falling?
Hi James and Team, what’s gone wrong with PME of late? I could add PNI to that question actually! Cheers, Greg
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Answer
Hi Greg,
The market has tuned against high value growth stocks, those that are trading on sky high valuations. The old adage of what goes up, must come down springs to mind. While looking at P/E’s is fairly irrelevant for stocks like Pro-Medicus (PME), trading on a P/E of ~100x shows you why it can be very volatile and susceptible to swings in sentiment. In terms of Pinnacle (PNI), these guys hold stakes in a bunch of fund managers and trade on a forward P/E of 28x, but you need only look at what the listed fund managers are trading on (MFG ~9.4x, PDL ~11x, PTM 11.9x) to see they have experienced big re-rates lower. While I think PNI should justify a higher multiple than the managers listed here given they have better growth through their suite of boutique funds, I’d still question paying 2.5x the multiple for PNI. In short, the sector has been re-rated and PNI is still expensive.
