Essay Example on Pro Medicus: Pioneering Imaging IT Solutions Globally Since 1983

Introduction

Pro Medicus Ltd is an imaging Information Technology company based in Australia. The company was founded in 1983 and has grown to become the leading imaging IT provider in Australia and globally. Today the company provides imaging IT solutions to healthcare groups, imaging centers and hospitals worldwide. Pro Medicus is globally known for producing high-quality health imaging software. The company operates under the brand Visage and has its main business segments in Australia, North America, and Europe. Pro Medicus Ltd product lines include e-health, healthcare imaging, and RIS (Radiology Information System). In most cases, the Imaging services provided by Pro Medicus are used in a combination to interpret images from imaging equipment like CT computed tomography, Ultrasound machines, Magnetic resonance imaging (MRI), and X-ray. Some of the Pro Medicus signature products include Visage Ease, Visage Ease Pro, Visage 7, and Visage RIS.

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Over the last five years, the company has performed very well financially with its stocks publicly traded in the ASX (Australia stock exchange). Over the last 52 weeks, the lowest share price was 14.500, and the highest share price was 38.390 (YahooFinance 2020). The lowest price was recorded in March 2020 and was the lowest recorded in the last three years and was attributed to the Covid-19 pandemic threat on the economy. In the 52 weeks range, over 104 million shares were traded with a market cap of $1. 76 Billion (ASX, 2020). The Pro Medicus share price has been relatively stable over the last three years, with an attractive annual dividend yield of 0.39% (Reuters 2020). On average, a volume of about half a million shares are traded on a daily basis, and a higher daily volume of shares traded is expected as the global post covid-19 economy stabilizes. Compared to its peers, the Pro Medicus share is a worthy investment, and below is companies SWOT analysis and recommendation on when to buy, hold, or sell Pro Medicus stocks.

Pro Medicus SWOT analysis

Strength: Automation of the company activities has enabled consistency in the quality of products and services hence making the brand successful in the market. The strong brand in the market is another strength that makes the company and its products the most preferred in the market. The company has a high return on its capital expenditure and optimally utilizes its highly skilled human resource to develop a strong brand portfolio of goods and services that ultimately satisfy the customer. Based on the company strength, Pro Medicus is the most reliable imaging IT provider globally.

Weakness: despite the fact that Pro Medicus is the most successful imaging IT provider, the company needs to invest more in technology. Technology is ever on the change, and its products need to be on the top of current technology, a concept that constrains the company's bottom line. The company has also not been successful in other businesses outside the core business of imaging IT solutions. Pro Medicus has ventured into hospital accounting software and queuing system software, but there has been little success compared to the imaging IT business. It is worth noting that the company's percentage of net Contribution and profitability ratio and below the industry average.

Opportunities: there are existing opportunities to engage in new markets due to the change in consumer behavior trends. Thus the new markets are new revenue lines and an opportunity for product diversification. With the advent of environmental policies, there is an opportunity to take advantage of the company's technology to gain an even higher market share in the market. Globalization and free trade agreements between governments provide an opportunity to expand the company market to new emerging markets. The company's success in the imaging IT solutions business is an opportunity to diversification into new business lines as the company's core competencies shall complement the new business lines.

Threats: competition is on the rise from both local and foreign companies with China-based companies offering low-priced solutions. The strategy to counter China-based companies is offering high quality at a low price, which affects the company's profitability. There is also an increase in counterfeit and low-quality imitations in the market. The threat is more in low-income markets and the emerging markets, which is a threat to the company image and reputation. The high cost of raw materials and production of the imaging IT solutions is a threat to the company's profitability.

Recommendations to BUY, HOLD and SELL

The decision to buy, hold, or sell Pro Medicus stocks should be strategic so as to earn high returns. However, below is the best recommendations on when to buy, hold, and sell Pro Medicus stocks.

When to buy: Pro Medicus stocks have been relatively stable for the last three years, thus to make a good gain, it best to buy the stocks in the period after a price crash. For example, those who bought the shares after the price crash due to the covid-19 economy shakeup in March 2020 are certain that they will earn a great gain from their investment. Secondly, it is also an opportune time to buy Pro Medicus stocks when the stocks are undervalued.

When to hold: Pro Medicus stocks are relatively stable, and it is best to hold the stocks during financial shakeups. Investors should hold the stocks during a bad financial quarter or during a rough financial year (Petrusheva and Jordanoski, 2016). Selling stocks during a financial crisis or when the company experiences a bad financial performance leads to an automatic loss. For example, investors who sold their stocks in March 2020 during the covid-19 economy shakeup made a loss out of their investment.

When to sell: the best time to sell Pro Medicus stocks is when the company valuation is high compared to others in the industry. According to Hargreaves and Mani (2015), high company valuation is an indicator of high stock prices, hence selling the company stocks in these periods guarantees the investor a good return.

Conclusion

Investing and trading with Pro Medicus stocks is a worthy venture, but it is important to take into consideration a few things from the company. The company sales are generated from the core business – imaging IT solutions and all other diversified products the company offers. Thus it is important to evaluate whether there is longevity or one-time sales growth to make a decision. The company's margins fluctuate, and improving margins is a good indicator, but deteriorating margins need not be automatically dismissed since the company may have just launched a new product line. Investors also need to critically analyze both the quarterly and end year financial guidance on future earnings and compare with Wall Street expectations. By making the comparison, it assists in making an informed decision. Sometimes there are stock buyback programs. For Pro Medicus, stock buyback programs is a strong indication of the management confidence and not a public relation gimmick to impress investors. Pro Medicus is an ever-innovative company that develops a new range of products every financial year; thus due to the ever-changing nature of technology, the company's profitability is highly fluctuating. Finally, investors need to be keen on the last one year and five years stock chart to note any seasonal variations and stock trends.

References

ASX 2020). Pro Medicus Limited. PME.AX. https://www.asx.com.au/asx/share-price-research/company/PMEHargreaves, C. A., & Mani, C. K. (2015). The Selection of winning stocks using principal component analysis. American Journal of Marketing Research, 1(3), 183-188.

Petrusheva, N., & Jordanoski, I. (2016). Comparative analysis between the fundamental and technical analysis of stocks. Journal of Process Management. New Technologies, 4(2), 26-31.

Reuters 2020). Pro Medicus Limited. PME.AX. https://www.reuters.com/companies/PME.AXYahooFinance 2020) Pro Medicus Limited (PMCUF). https://finance.yahoo.com/quote/PMCUF/