One of the best performers on the Australian share market over the past 12 months has been Pro Medicus Limited (ASX: PME).
Over the period, the ASX 200 tech stock has rocketed approximately 115%.
But if you thought the gains were over, think again!
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Why this rocketing ASX 200 tech stock can keep rising
According to a note out of Goldman Sachs, its analysts believe that Pro Medicus shares can keep rising from current levels.
This is thanks to its market leadership position and competitive advantage over peers. Goldman explains:
PME continues to demonstrate strong momentum within the business, acquiring customers across a broad range of markets and specialties. Despite a material step-up in the frequency and value of recent contract wins, we believe the pipeline remains healthy with little sign of competition being close to matching the Visage solution. PME's share of the US market remains low at 7%, which highlights the opportunity ahead, notwithstanding upside prospects from the core TAM, adjacencies (cardiology & AI) and potential new markets.
Four reasons to buy
Goldman also highlights four reasons why it thinks the future is bright for this ASX 200 tech stock.
The first relates to its market share opportunity, which it believes can grow materially from 7% today. It said:
Long-term US market share >25%: Looking at US MedTech, we find there is significant opportunity to capture share (even in established markets) with particular segments dominated by one to two players.
Goldman likes the strong return on investment (ROI) that Pro Medicus' Visage offering generates. It explains:
Strong ROI generated through Visage: Our analysis shows a clinic could return >16x the cost of Visage assuming a +25% increase in scan volumes, which should justify the incremental cost paid to PME.
The broker also highlights that the company has opportunities to grow its core total addressable market (TAM) materially. It explains:
Growth in the core TAM: We estimate the US Department of Defence opportunity could present an additional +50mn scans p.a., with Europe being a key longer-term growth opportunity as regulatory obstacles clear.
Finally, Goldman sees artificial intelligence (AI) and cardiology adoption as key drivers of growth. It said:
Adjacencies approaching broader adoption: PME looks well positioned to take share in cardiology and AI, being uniquely partnered with medical KOLs in settings that are generally well-funded and willing to adopt new technology, helping drive a network effect through the industry
Time to buy
In light of this, the broker has boosted its earnings estimates and valuation accordingly.
And while it acknowledges that the ASX 200 tech stock is not cheap, it believes this is justified by its " revenue/margin outlook, unique cloud offering, and significant long-term opportunity."
Goldman has reiterated its buy rating on Pro Medicus' shares and lifted its price target by 30% to $193.00. This implies potential upside of 12% for investors from current levels.
