Broker tips Pro Medicus share price to shoot 25% higher

Man drawing an upward line on a bar graph symbolising a rising share price.

Man drawing an upward line on a bar graph symbolising a rising share price.

The Pro Medicus Limited (ASX: PME) share price failed to take off on Thursday due to weakness in the tech sector.

This was despite the health imaging technology company announcing a major new contract win.

What did Pro Medicus announce?

Yesterday, Pro Medicus announced a $28 million, seven-year contract with Allina Health. It is a not-for-profit health care system based in Minneapolis with 28,000 employees across 11 hospitals and more than 90 clinics.

The contract is based on a transactional licensing model and will see the company’s increasingly popular Visage 7 Enterprise Imaging Platform and Visage 7 Workflow module implemented throughout Allina Health. This will provide it with a unified diagnostic imaging platform across the network.

What was the response?

While the market’s response was subdued, analysts at Bell Potter were very pleased with the news.

According to a note, Bell Potter believes this new contract win highlights that Visage could “be the emerging standard for the viewing of radiology images in the US.”

In addition, the broker was pleased to see management commenting that its sales pipeline remains strong.  It said:

[T]he CEO has again described the pipeline as “remaining strong”. The same phrase has consistently been used to describe the pipeline for several years and the company is yet to disappoint the market’s expectation for revenue growth.

We maintain our expectation of ongoing growth in contracts noting that PME has barely scratched the surface of the IDN market in the US. There are approximately 1,000 IDN’s operating in the US Healthcare system.

In light of this, the broker has retained its buy rating and $55.00 price target on the company’s shares.

Based on the current Pro Medicus share price, this implies potential upside of approximately 25% over the next 12 months.

The post Broker tips Pro Medicus share price to shoot 25% higher appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Pro Medicus Ltd. The Motley Fool Australia has positions in and has recommended Pro Medicus Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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