Why the Pro Medicus share price is climbing again

Over FY 2019 Pro Medicus nearly doubled its net profit to $19.3 million on sales of $50.1 million.

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The Pro Medicus Limited (ASX: PME) share price is up 3.3% to $25.99 today after the medical imaging business held a positive AGM in Melbourne yesterday. It told investors it anticipates "another strong year" in FY 2020 with the majority of growth to be delivered over the second half. 

Over FY 2019 Pro Medicus nearly doubled its net profit to $19.3 million on sales of $50.1 million. The majority of the revenue is recurring and we can see that Pro Medicus boasts the very high profit margins that are the calling card of the best enterprise-facing software-as-a-service players.

Notably, the company also used the AGM to reference that its recent inclusion into the S&P/ ASX200 (ASX: XJO) has led to a more volatile share price and higher volumes. In part this is because index tracking funds often structured as ETFs bought the stock regardless of its valuation. 

The board also reported it has started to buyback shares since its inclusion into the S&P/ ASX200. Given the lofty valuation the business trades on this is likely to raise questions over whether it's a sensible allocation of capital. Given the astonishing share price growth most Pro Medicus shareholders have little room for complaints with management. 

Tom Richardson owns shares of Pro Medicus Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. The Motley Fool Australia has recommended Pro Medicus Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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