The Integral Diagnostics Ltd (ASX: IDX) share price has been a positive performer on Tuesday.
In morning trade, the medical imaging service provider's shares are up 1.5% to $4.50.
This means the Integral Diagnostics share price is now up a solid 25% since this time last year.
Can the Integral Diagnostics share price go even higher?
Positively, one leading broker believes the Integral Diagnostics share price can still go a lot higher from here.
According to a recent note out of Goldman Sachs, its analysts have initiated coverage on the company with a buy rating and $5.50 price target.
Based on the current Integral Diagnostics share price, this implies potential upside of ~22% over the next 12 months.
And if you include the 2.5% dividend yield that the broker is forecasting, this potential return stretches to almost 25%.
Why is Goldman Sachs bullish on Integral Diagnostics?
Goldman believes the medical imaging service provider is a well-run business in an attractive industry.
It also notes that it has a relatively secure volume profile of mid to high single digit growth and a clear path for further growth through brownfield expansions and merger and acquisition activities.
In addition, Goldman feels Integral Diagnostics is well-positioned to benefit from a number of key drivers. These include:
"1) Aging population and increasing prevalence of chronic diseases underpin the long term sustainability of the industry's volume growth profile;
2) Steady increase in utilisation/vol. of MRI and CT as Australia's current levels still remain well below its developed market peers (c.-50%), and we see little impediment to the narrowing of that gap;
3) Positive mix shift to high-acuity modalities over the mid-term (MRI, CT and PET) as these services deliver higher quality clinical outcomes while also generating higher revenue/margin per service for IDX (CT and MRI revenue c.2-3x above industry avg);
4) Pricing tailwind from reintroduction of indexation at c.1.5% p.a for 90% of Medicare items (c.80% of benefits). Further upside risk for pricing should MRI & PET (20% of benefits) get reindexed;
5) Clear scope for growth via further brownfield expansion and M&A (consolidation of a fragmented industry), for which we see a long runway of opportunities in both areas."
All in all, Goldman expects this to lead to earnings growth of ~9% per annum through to FY 2023.
And with the Integral Diagnostics share price trading at 22x estimated FY 2021 earnings, it feels this is an undemanding valuation for its current growth profile.
