The Pro Medicus share price is on form today…
The post Why is the Pro Medicus (ASX:PME) share price jumping 4% today? appeared first on The Motley Fool Australia. –
The Pro Medicus Limited (ASX: PME) share price has been a strong performer on Thursday.
In afternoon trade, the health imaging technology company’s shares are up 4.5% to $52.94.
Why is the Pro Medicus share price charging higher?
There appear to have been a couple of catalysts for the strong performance by the Pro Medicus share price today.
One is a rebound in the tech sector following some recent weakness. At the time of writing, the S&P/ASX All Technology Index (ASX: XTX) is up a decent 2.2%.
This is more than triple the gain of the the S&P/ASX 200 Index (ASX: XJO), which is up 0.7% this afternoon.
What else is lifting its shares?
Also giving Pro Medicus’ shares a lift has been a positive reaction by a leading broker to a major new contract win.
Last week the company announced its joint largest contract to date – a seven-year, $40 million deal with US leading healthcare provider, Novant Health.
In response to the news and recent weakness in the Pro Medicus share price, the team at Morgans upgraded its shares to a hold rating with a $54.49 price target.
This price target suggests that its shares could still rise a further 3% from here.
What did the broker say?
Morgans was pleased with the contract win. It said: “A strong announcement which highlights the quality of the offering given the contract to replace multiple legacy PACS solutions for multiple products. The deal marks the seventh major contract over the last 18 months, with the five year contracted pipeline now sitting at an impressive A$350m.”
In respect to its valuation, while Morgans acknowledges that the Pro Medicus share price trades on sky-high multiples, it believes its quality and growth potential justifies this.
It explained: “While valuations remain elevated (~130x FY22 PE), we view PME as a highly impressive company with a strong and growing contracted revenue base which should continue to grow into its high multiple over time. Valuation remains the only barrier to further positivity.”
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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. owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia owns shares of 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 Bruce Jackson.