Guess which ASX 200 tech share Goldman Sachs says is a buy

Goldman Sachs is saying good things about this tech stock.

| More on:
two computer geeks sit across from each other with their laptop computers touching as they look confused and confounded by what they are seeing on their screens.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you're wanting exposure to the tech sector, then it could be worth considering Pro Medicus Limited (ASX: PME).

That's the view of analysts at Goldman Sachs, which see plenty of upside for the ASX 200 tech share.

What is Goldman saying about this ASX 200 tech share?

According to the note, the broker was pleased with Pro Medicus' performance in FY 2023. It notes that the company's "revenue growth of +34% came in +3% ahead of consensus, driven by the key recurrent CF stream (transaction revenue +44%)."

The good news is that Goldman believes that there's more of the same coming in the new financial year. It adds:

Forward commentary/guidance was characteristically limited, but we believe the FY24 revenue profile is largely de-risked due to the full-year consolidation impact from Novant, Inova and Allina, in addition to the implementation of new contracts announced through the last 12m.

But if you thought its growth would end then, think again. Its analysts "now forecast revenue growth of +26% in FY24 and a +19% CAGR from FY23-26E."

In light of this positive growth outlook, the broker believes that the company's shares are good value at current levels. It explains:

On our estimates, PME currently trades on 65x NTM EV/EBITDA (noting we are +8-9% above EBITDA consensus in FY24/25E). Whilst the stock does not look cheap on near-term multiples: i) the business is highly profitable (>50% net margins); ii) cash flows are recurrent/long-dated in nature (5/7-year contracts); and iii) the balance sheet is robust ($121.5m net cash).

Valuation

The note reveals that Goldman has responded to the result by retaining its buy rating with an improved price target of $80 (from $76).

Based on the current Pro Medicus share price of $70.10, this implies a 14% upside for this ASX 200 tech share over the next 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Pro Medicus. The Motley Fool Australia has recommended Pro Medicus. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

Man holding a calculator with Australian dollar notes, symbolising dividends.
Technology Shares

$10,000 invested in DroneShield shares 5 years ago is now worth…

You might be laughing all the way to the bank if you had done this.

Read more »

Happy woman working on a laptop.
Technology Shares

Up 60% since April, why this $40 billion ASX 200 tech stock remains a 'compelling buy' today

A leading expert believes this $40 billion ASX 200 tech stock has a lengthy growth runway ahead of it yet.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

DroneShield shares sink 7% despite big news

Let's see what's going on with this market darling on Thursday.

Read more »

A man activates an arrow shooting up into a cloud sign on his iPad.
Technology Shares

Up 25% since April, is it too late to buy Xero shares today?

A leading expert gives his verdict on the growth outlook for Xero shares.

Read more »

Man looking at digital holograms of graphs, charts, and data.
Technology Shares

2 amazing ASX tech shares I wish I'd bought last year

These tech companies are among the world’s best companies.

Read more »

A man in a business suit and tie places three wooden blocks with the numbers 1, 2, and 3 on them on top of each other.
Broker Notes

3 reasons to buy this booming ASX All Ords tech stock today

A leading broker forecasts more gains to come from this surging ASX All Ords tech stock.

Read more »

Man ponders a receipt as he looks at his laptop.
Technology Shares

Brokers rerate 3 leading ASX 200 tech stocks

Experts reveal their ratings on the ASX 200 tech sector's three biggest companies.

Read more »

Hologram of a man next to a human robot, symbolising artificial intelligence.
AI Stocks

Why Macquarie forecasts a big rebound for these 2 quality ASX All Ords tech stocks

Macquarie expects a big rebound is coming for these AI linked, ASX All Ords tech stocks.

Read more »