One of the best-performing small-cap stocks over the past couple of months is medical imaging software retailer Pro Medicus Limited (ASX: PME).
The company has nearly tripled in value over the course of 2015 thanks to growing sales of its software that lets radiologists view images on mobile or desktop platforms.
The different software packages it sells also helps its healthcare clients improve efficiency in terms of record keeping, reporting, patient management and administration.
Unsurprisingly much of Pro Medicus's success has been in the world's largest private healthcare market of the US, where the opportunity to save on costs and lift profit is constantly sought after by a network of private hospitals, insurers, and private imaging centres.
The company posted a profit of $3.2 million on revenues of $17.6 million for the financial year ending June 2015. The group's current market valuation of $335 million looks lofty in the context of its most recent financial results, although it has made a very strong start to this financial year with several big new client wins in the US.
One deal announced last month was worth $11 million over a five-year period and as a software-oriented business it has plenty of operating leverage to increase profits faster than revenues as the cost base is relatively fixed. Pro Medicus is also founder led and has potential for margin and geographic market expansion.
Given that for now much of the revenues are earned in the US the outlook for the Australian dollar is another consideration and its recent weakening has proven another tailwind.
The market is clearly expecting more growth to come from the US market and with momentum and technology on its side Pro Medicus may keep delivering yet.
Other junior medical device businesses performing well recently include sleep treatment innovator Somnomed Limited (ASX: SOM) and medical device disinfectant specialist Nanosonics Ltd. (ASX: NAN). Both of these businesses are also succeeding in growing sales in the US private healthcare market and are worth considering for investors prepared to take on more risk.
