Down 65%: Are Pro Medicus shares in the buy zone yet?

It’s no secret that the past few weeks have been tough for most ASX investors. At least those without a portfolio full of energy stocks. Since the beginning of March, the S&P/ASX 200 Index (ASX: XJO) has dropped by more than 7%, which is a fairly hefty fall for four weeks’ worth of trading. But let’s talk about the journey that Pro Medicus Ltd (ASX: PME) shares have had.

At first glance, it doesn’t look as though Pro Medicus’ share price has fared any worse than the broader market. The medical imaging tech stock has retreated by 6.15% since 2 March, just under the 6.2% the ASX 200 has shed over that same period.

This ASX stock has had a tough few months…

But if we zoom out, the picture gets a lot bleaker for Pro Medicus investors. This ASX tech stock last peaked in July last year, hitting a new record high of $336. Ever since then, it has been down and down for the company. At today’s share price (at the time of writing) of $118.11, Pro Medicus is down a horrid 64.85% from that high. That would have come as quite a shock to investors in this company, who, barring market-wide sell-offs, have largely had to sit back and watch it go up and to the right for years now.

It’s not like Pro Medicus has given investors an obvious reason to hit the sell button either. Back in February, the company posted its latest half-year results, which were hard to fault. Pro Medicus reported revenue growth of 28.4% to $124.8 million for the six months to 31 December. Underlying profits were up an even more impressive 29.7% to $90.7  million. That allowed the company to hike its interim dividend by a whopping 28% to 32 cents per share. Pro Medicus has also continued to announce new contract signings regularly.

So, given all this, many investors might be wondering whether Pro Medicus shares offer a compelling ‘buy-the-dip’ opportunity right now.

Down 65%: Is it time to buy Pro Medicus shares?

Almost every ASX broker covering this company agrees that the Pro Medicus sell-down represents a lucrative buying opportunity.

Last week, my Fool colleague discussed Morgans’ ‘buy’ rating for the company, which included a 12-month share price target of $275. That’s more than a doubling of where the shares are today. The broker commented that “the [market] reaction feels overcooked and the setup into 2H is far better than the share price implies”.

Another broker, Bell Potter, agrees. It currently has a $240 target on Pro Medicus shares and recently stated, “The company continues to announce new contract wins on a regular basis as the drivers of interest in its product offering remain firmly in place.”

Of course, we’ll have to see if these brokers are on the money. But Pro Medicus’ stunning growth and strong fundamentals do, arguably, make this a stock well worth a deeper dive whilst it is trading at this steep discount.

The post Down 65%: Are Pro Medicus shares in the buy zone yet? appeared first on The Motley Fool Australia.

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