Although the Pro Medicus Limited (ASX: PME) share price is down materially from its 52-week high, it is still up significantly over the last 12 months.
Since this time last year, the medical imaging software company's shares are up a massive 106%.
Why has the Pro Medicus share price doubled in value in 12 months?
The catalyst for Pro Medicus' impressive gain over the last 12 months was its performance during FY 2019.
For the 12 months ended June 30, the company delivered a 48% increase in revenue to $50.1 million.
This was the result of strong growth across its business during the period. Pro Medicus reported revenue growth of 102.3% in Europe, 30.2% in Australia, and 42.2% in North America.
The latter was thanks to the take-up of its full range of radiology IT software solutions by an increasing number of large, tier-one US hospitals and academic institutions. Management believes this was further validation of its technology.
Things were even better on the bottom line as the company demonstrated the benefits of its scalable business model.
Over the 12 months the company reported a net profit after tax of $19.1 million. This was up a massive 92% on the prior corresponding period.
Why is the Pro Medicus share price down 31% from its high?
In September the company's executive director Anthony Hall and its CEO Sam Hupert offloaded 1 million shares each via an underwritten block trade.
Both executives received an average of $36.10 per share, which equates to a total consideration of $36.1 million. This was a 5% discount to the share price at the time of the sales.
This appears to have spooked investors and led to many following their lead and locking in some of the stellar gains that were made in 2019.
Also weighing on its shares was news that rival medical imaging software provider Canon signed a $47.2 million contract with WA Health in October. This contract was for the roll out of a new medical imaging system, replacing the state's old Agfa radiology information (RIS) and picture archiving and communication (PACS) systems.
However, the company revealed that it chose not to bid for the contract after deciding that its efforts would be better rewarded elsewhere. So, these competition concerns appear unwarranted.
Should you invest?
Whilst its shares trade at a significant premium to the market average, I would still be a buyer of them with a long-term view.
This is because I believe it is capable of growing its earnings at an above-average rate for a long time to come due to the quality of its technology and its massive market opportunity.
Though, due to the premium its shares trade at, it might be best to restrict any investment to just a small part of your portfolio.
In addition to Pro Medicus, I think fellow healthcare technology shares Nanosonics Ltd (ASX: NAN) and Volpara Health Technologies Ltd (ASX: VHT) would be worth considering.
