This ASX 200 share has ‘all the qualities of a compounder’: experts

The Pro Medicus Limited (ASX: PME) share price is up 1% to $51.83 at the time of writing.

The ASX healthcare share got a bit of a plug from two analysts today. Let’s see what Hayborough Investment Partners’ Ben Rundle and Medallion Financial’s Michael Wayne had to say.

Pro Medicus share price a buy: experts

In a Livewire interview, Rundle said the ASX 200 darling is a buy despite its eye-watering valuation.

Westpac data shows the Pro Medicus share price is trading on a price-to-earnings (P/E) ratio of 105.18.

That’s almost five times the healthcare sector of 21.83 and seven times the broader market P/E of 14.79.

In its FY22 full-year results released in August, Pro Medicus reported a net profit of $44.4 million, up 44.1% on FY21, and no debt.

Rundle said:

Look, I recognise that it’s on an eye-watering valuation, but it’s just such a high-quality business. The quality of its earnings is fantastic, it has a fantastic management team, and a great product.

It’s really hard to bet against this company. It has all the qualities of a compounder, and therefore I think it keeps compounding.

Wayne added his buy endorsement, too:

It’s one that we’ve held for some time and continue to like it. You look at the balance sheet, all those key metrics are trending in the right direction — revenue, earnings, margins, and return on equity (ROE).

They developed a very good product, and have been able to go out and market it very well and win very high-quality contracts. A lot of their contracts are six to eight years. A lot of those have been renewed and rolled over.

They’ve also got a good backlog of inquiries for different tenders.

What’s next for Pro Medicus?

Wayne said he was keeping an eye on the expansion of Pro Medicus and the take-up of its product.

He explained:

One concern that we might have just to be careful of long term is they’ve targeted the academic hospitals in the US (private academic hospitals). They’ve been very successful there. A lot of those hospitals aren’t as cost-conscious as some of the others, so they might struggle to have as much of an impact on the broader hospital network in the US.

However, it’s a proven product. It’s very, very technologically advanced and can save a lot of time within those hospital operations.

Pro Medicus announced yesterday that it will hold its annual general meeting on 21 November.

The post This ASX 200 share has ‘all the qualities of a compounder’: experts appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has positions in Pro Medicus Ltd. 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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