The Pro Medicus Ltd (ASX: PME) share price is down more than 5% in reaction to the company’s FY20 result.
Most of the time reporting season is more a test of how a business does compared the expectations rather than the number itself – even if the profit growth is good.
Pro Medicus FY20 report
Pro Medicus reported that revenue from underlying operations increased by 23.9% to $56.8 million. There was revenue growth of 23.7% in North America and 19.2% in Australia. Revenue from European operations fell 37.7% as a result of the one-off sale to the German government in the previous period.
The company won a few contracts in FY20 such as this one and this one in the US. These newer contracts are based on recurring transaction based revenue, which builds the base and future years to come.
Management was pleased by the fact the company was able to keep operating at 100% capacity through this COVID-19, though the work was done remotely. It was still able to carry out its sales and marketing.
In FY20 Pro Medicus saw its EBIT margin (click here to learn what EBIT means) improve from 51.6% to 52.5%. That’s very high for the ASX, it allows a lot of the new revenue to fall to net profit line.
Pro Medicus said that underlying profit before tax rose by 33.4% to $30.2 million and net profit after tax increased by 20.7% to $23.1 million.
The company finished with a cash balance of $43.4 million, up 34.3% from a year ago. It’s still debt free.
Dividend
Pro Medicus announced a final fully franked dividend of 6 cents per share, bringing the full year dividend to 12 cents per share.
Outlook
Examination numbers are now back to more than 90% of pre-COVID levels. In some cases it’s back to 100%. Management said that its pipeline continues to be strong and those opportunities are working through the sales cycle.
Pro Medicus CEO Dr Sam Hupert said on its pipeline: “We said in June when we announced the Northwestern contract that the pipeline was the strongest it has ever been both in terms of quantity and quality, and we still believe this to be the case. Those opportunities that were in the pipeline then, have continued to progress through the sales cycle; we have no lost any.
“Some of these are looking at more than one product and there are those that have expressed a preference for Visage in the Cloud, so a good mix of opportunities. We have also seen a number of new opportunities emerge even during COVID-19, contrary to what most people would have expected so there is strong interest.”
Pro Medicus is a great business, it was a solid result for existing shareholders. I think a lower share price makes it more of a buy than it was before. However, it does still have a very high price/earnings ratio – so Pro Medicus does need to create good growth to justify today’s valuation. I’d buy shares if they fell heavily, but something like Pushpay Holdings Ltd (ASX: PPH) seems better value in my opinion.
You can read another analyst’s take, Claude Walker, on the A Rich Life website here:
