An important move for momentum traders to start the week saw Pro Medicus shares (ASX: PME) pushed back above two closely watched technical levels, amid what has been a particularly volatile year for the stock.
After spending much of September and October grinding lower alongside a declining 200 day SMA, the PME share price has now broken decisively higher over two consecutive sessions. Friday’s 4.5% gain was followed by a further 1.59% gain to leave the stock at A$168.37, clearing both the 30 day SMA at A$165.32 and the 200-day at A$160.52 in the process.
The move provides some technical relief for holders that have had to endure a difficult year, with the stock continuing to trade 24.37% lower YTD and 41.61% down over the past 12 months. The question now is whether a genuine momentum shift is taking place, or if this is merely a stopgap in a longer term drawdown.
Recent Fundamental Support
Despite the volatility in the stock, fundamentals remains strong, with the flagship radiology platform Visage 7 delivering strong commercial momentum across North America, which now accounts for approximately 90% of total group revenue. Recent contract activity has been substantial, with the company reporting over A$407 million in combined new contract wins and renewals across recent reporting cycles. A seven-year, A$25 million agreement with Valley Health is among the more recent additions to the pipeline, reinforcing the platform’s appeal to large US health systems.
Top Australian Brokers
- Pepperstone - Top Australian broker - Read our review
- eToro - Invest in ASX and international shares - Read our review
Full-year results showed underlying revenue growth of 28%, with EBIT rising 31% and net profit after tax (NPAT) climbing 33%. Operating margins sit at approximately 75%, underpinned by an asset-light SaaS delivery model that generates exceptional operating leverage. Cash conversion stands at around 91%, and the company carries a net cash balance of approximately A$250 million with virtually no debt.
The company is also investing in adjacent growth opportunities, including artificial intelligence-driven modules for digital pathology and breast cancer detection, which markets view as medium-term catalysts capable of extending the Visage 7 ecosystem beyond its core radiology base.
Outlook and Analysis
From a technical perspective, reclaiming the 200-day SMA is a meaningful development for momentum-traders, even if the line itself remains in a downtrend. We would be looking for a firm break above the overhead 50 day at A$173 as the next meaningful hurdle, with a push back into the $180-A$200 band needed to reverse trend.
A volatile year that has seen a 50% drawdown into February, and a 55% bounce since suggests there is plenty for both sides to cling to. But this final quarter could well set the tone for what comes next.
Bull Case:
- Reclaimed 30-day and 200-day SMAs signal potential end to multi-month downtrend.
- Over A$407 million in contract wins confirms Visage 7’s strong North American demand.
- 33% NPAT growth, 75% margins, and zero debt underpin exceptional financial quality.
Bear Case:
- Trailing P/E of 66x leaves no room for execution delays or earnings misses.
- Stock remains down 24% YTD and over 40% below 52-week highs despite recent bounce.
- Roughly 90% revenue concentration in US healthcare creates meaningful single-market risk.
