The Pro Medicus (ASX: PME) share price climbed 5% to hit a record high of $14.94 in trade today despite the software-as-service medical imaging business releasing no specific news to the market.
In total the PME share price is now up 58% over just the last six months and an incredible 18x from 80 cents to $14.50 over just the past 5 years.
When a company posts these kind of eye-watering gains investors would be foolish to ignore it.
Over the last 6 months Pro Medicus has announced a couple of important new contracts in the US and Germany, but it seems increased analyst, sell side broker, and media attention are all helping to drive the share price higher.
After all, in FY 2018 it posted a net profit of $12.7 million on revenue of $35.9 million, yet today has a market value close to $1.5 billion.
Of course share prices are forward looking and it seems investors are counting on Pro Medicus delivering strong profit growth long into the future.
The valuation is also likely high as a lot of its revenues are recurring and contracted to give analysts using discounted cash flow valuation models greater certainty over 5-year revenue and profit streams at least. This can produce a lower discount rate for the risk that these cash flows don't appear and therefore a higher valuation.
Pro Medicus is not the only software-as-a-service recurring revenue business model stock on the ASX rocketing, with the likes of Xero Limited (ASX: XRO) and WiseTech Global Ltd (ASX: WTC) also impressing.
