Looking for an ASX growth share? Try the Pro Medicus Limited (ASX:PME) share price

The Pro Medicus Limited (ASX:PME) share price is up 80.7% since the start of 2024. It's probably worth asking, 'is the PME share price undervalued?'
The Pro Medicus Limited (ASX:PME) share price is up 80.7% since the start of 2024. At the same time, the CSL Ltd (ASX:CSL) share price is 9.1% away from its 52-week high. This brief article explains why it could be worth adding PME and CSL shares to your ASX investing stock watchlist.

PME share price in focus

Founded in 1983, Pro Medicus is a provider of radiology IT software for hospitals, imaging centres and health care groups worldwide.

The Pro Medicus suite of products centre around radiology information systems (RIS), Picture Archiving and Communication Systems (PACS), and advanced visualisation solutions. These products support everything from patient scheduling and billing to fast medical imaging interpretations and analysis.

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.

CSL shares

CSL is a global biotechnology company that develops and delivers innovative medicines that save lives, protect public health, and help people with life-threatening medical conditions live full lives.

The company is divided into three main business units: CSL Behring, CSL Seqirus and CSL Vifor. Behring, acquired in 2004, manufactures and distributes blood plasma products. Seqirus was formed by a rebranding of BioCSL and the acquired Novartis flu business (bought in 2015), and makes flu-related products and performs pandemic-related services for Governments. Finally, Vifor makes products for iron deficiency and nephrology (renal/kidney care).

CSL has developed a reputation with Australian investors over many decades as being a reliable company and a consistent dividend payer. Many consider an investment in CSL to be an indirect play on the continuing rise in healthcare costs.

PME share price valuation

As a growth company, one way to put a rough calculation on the PME share price could be to compare its price-to-sales multiple over time. Currently, Pro Medicus Limited shares have a price-sales ratio of 112.61x, compared to its 5-year average of 82.69x, meaning its shares are trading higher than their historical average. Please keep in mind that context is important – and this is just one valuation technique. Investment decisions can’t just be based on one metric.

Since it is a more of a ‘blue chip’ company, we could look at the dividend yield of CSL to determine its value. CSL is offering a historical dividend yield of around 1.39%, which compares to its 5-year average of 1.50%. The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets. Both of these models would be a better way to value the CSL share price.

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