So far in 2022 the Pro Medicus Limited (ASX: PME) share price has traced 32% lower. In that time, the Australian Ethical Investment Ltd (ASX: AEF) share price has drifted 63% lower. Ouch!
PME share price
Founded in 1983, Pro Medicus is a provider of radiology IT software for hospitals, imaging centres and health care groups worldwide.
While the Pro Medicus business specialises in software, it is divided across two segments: Visage Imaging, and the Radiology Information System (RIS). Visage Imaging is now the company’s core product and allows hospitals to stream, store and analyse medical images in the cloud, with its primary focus being in the USA. RIS is the company’s original software product offered to radiology clinics to help them manage the workflow of the clinic. Its primary focus is the Australian market.
The company’s value proposition partly lies within its flagship Visage software which allows radiologists to view large image files generated by X-rays remotely on mobile devices. This allows diagnostic decisions to be made on the go and ideally improves patient outcomes.
AEF share price
Australian Ethical describes itself as Australia’s leading ethical investment manager. It was formed in 1986 to provide investors with wealth management products that align with their values and provide competitive returns. Investments are guided by the Australian Ethical Charter. It has billions of dollars of funds under management (FUM) across its managed funds and superannuation.
Australian Ethical’s business model is focused on helping investors manage their money, whether it’s inside Super or in a personal investment portfolio. Therefore, Australian Ethical’s various business ‘units’ intertwine and so they present results based on the type of revenue, rather than by geography or product. AEF makes most of its money from ongoing yearly management fees, with additional revenue coming from performance fees and admin fees. Australian Ethical has established itself as one of Australia’s leaders in ethical investing, complete with its own Ethical Charter, ethics committee and research team.
While some fund managers or Super funds espouse the virtues of investing ethically, it seems to us that Australian Ethical has embedded its ethical focus within its investment process, meaning ethics are considered throughout the investment process — not as an after-thought. Australian Ethical has grown its revenue at around 10% per year for three years, but its share valuation is still well above the ASX average — that means, investors are hoping for more top-line growth.
Ultimately, investors in both Pro Medicus and Australian Ethical have enjoyed the past five years of growth, but their current valuations are demanding. Therefore, they may be better on the watchlist for now.
