Pro Medicus (ASX:PME) Could Be 8% Undervalued On Its A$23 Million St Luke's Win
Pro Medicus (ASX:PME) has announced a 7 year A$23 million contract with St. Luke's Health System in Boise, Idaho, to deploy its Visage 7 Enterprise Imaging Platform across the network.
See our latest analysis for Pro Medicus.
The latest contract win comes after a mixed year for Pro Medicus, with the share price at A$181.67 and recent momentum easing over the past month, even as the 90 day share price return is up 49.4% and the 3 year total shareholder return is 161.94%.
If this St. Luke's deal has you thinking about where healthcare imaging and AI could head next, it may be worth scanning the opportunity set with the 7 healthcare AI stocks.
Bulls see Pro Medicus as a high quality compounder after the St. Luke's win. Bears point to the share price and recent share price swings. Which case does the current valuation lean toward as you weigh the numbers?
Most Popular Narrative: 7.7% Undervalued
Pro Medicus trades at A$181.67 against a narrative fair value of A$196.78, which frames the latest St. Luke's contract within a broader long-term story and past share price swings.
At $120, the stock offers an asymmetric setup: you are not buying a distressed company, you are buying a best-in-class franchise that has temporarily disappointed quarterly expectations in a business where revenue is inherently lumpy. The contract backlog, the renewal rate, the margin profile, and the expanding addressable market have not changed. The price has.
Curious what sits behind that fair value for Pro Medicus? The narrative focuses on sustained revenue expansion, strong profitability and a rich earnings multiple that echoes premium software leaders.
Result: Fair Value of A$196.78 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Pro Medicus still faces real pressure points, including potential hospital IT budget tightening and faster than expected shifts in how AI reshapes imaging workflows.
Find out about the key risks to this Pro Medicus narrative.
Another View: Pro Medicus on Earnings Multiples
The narrative fair value suggests Pro Medicus is 7.7% undervalued at A$181.67. However, the current P/E of 80.9x sits far above the global Healthcare Services average of 28.2x, the peer average of 30x and the fair ratio of 30.3x. That gap points to meaningful valuation risk if sentiment cools.
For a closer look at what that rich P/E could mean over time, including how it compares with the fair ratio as the market adjusts, See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
If this mix of risks and rewards around Pro Medicus feels finely balanced, it makes sense to move quickly and test the data yourself. To weigh up both sides with a clear snapshot, start by reviewing the 2 key rewards and 1 important warning sign.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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