The Pro Medicus Limited (ASX: PME) share price has been a strong performer in 2021.
Since the start of the year, the health imaging company's shares have rallied an impressive 27% higher.
This means the Pro Medicus share price has now doubled in value over the last 12 months.
Is it too late to buy Pro Medicus shares?
The good news for investors is that it may not be too late to buy Pro Medicus shares.
According to a note out of Goldman Sachs this morning, the broker has upgraded its shares to a buy rating with a $53.80 price target.
This price target implies potential upside of approximately 20% over the next 12 months.
Why is Goldman Sachs bullish on Pro Medicus?
Goldman has been impressed with the way the company continues to win large contracts in a difficult operating environment.
It explained: "Whilst many healthcare IT projects continue to face uncertainties associated with Covid-19, the demand for PME's Visage 7 PACS technology has been robust, speaking to the strength of the solution, as well as the growing importance of an IT system that can improve efficiencies whilst healthcare imaging data continues to grow exponentially."
"Through a highly challenging period, the cadence of PME's contract wins has actually increased, whilst the quality/breadth of the customer base has also strengthened. In the last 8 months alone, PME has signed 6 new contracts at an average minimum size of $24m, including a further 3 of the Top 10 hospitals in the country (against a trailing 3-year average of 5 and $15m respectively)," it added.
The broker believes this provides strong validation of its technology advantage over the competition.
What is Goldman forecasting?
Although Pro Medicus shares clearly trade at a premium to the market average, Goldman believes its growth profile justifies this.
It explained: "Whilst not cheap in absolute terms, our new estimates imply a +42% EBITDA CAGR (FY20-23E). In the context of ASX Healthcare, which trades at a 'multiple to growth' ratio of 2.9x, we do not see PME's ratio of 1.4x as demanding, particularly given its position as a technology leader in a market we believe is set for further technology upgrades, and a recurrent revenue model with inherent upside. We upgrade to Buy."
All eyes will be on the Pro Medicus share price at the open.
