Treasure Chest | Jun 04 2026
This story features PRO MEDICUS LIMITED.
For more info SHARE ANALYSIS: PME
The company is included in ASX100, ASX200, ASX300, ALL-ORDS and ALL-TECH
FNArena's Treasure Chest reports on money making ideas from stockbrokers and other experts. Today's idea is Pro Medicus.
By Danielle Ecuyer
FNArena’s Treasure Chest reports on money making ideas from stockbrokers and other experts.
Whose Idea Is It?
Morgans
The subject:
Pro Medicus ((PME))
The company has strengthened its growth outlook through a series of major contract wins and renewals alongside product wins as new modules like Workflow and Cardiology have been added.
Channel checks and management commentary reinforce the view AI is more likely to enhance than disrupt the company’s competitive position.
Equally, Morgans states recent market updates push back on the narrative that AI-disruption will result in shorter tenure contract wins and renewals against the historical precedent.
More info:
Morgans’ positive stance on Pro Medicus follows three recent contract wins, which Macquarie described as a “diverse range”, along with multiple channel checks that help de-risk concerns around potential AI disruption.
Outlining the contracts in an interview, CEO Sam Hupert explained the Beth Israel Lahey Health contract for $90m over seven years strengthens the company’s position in the key Boston market.
The University of Maryland contract was notable as the health system had been a long-standing reference customer for a major competitor. Macquarie pointed to the inclusion of Viewer/Workflow on cloud for $23m over five years.
This was a significant win, according to Macquarie, a view echoed by Morgans.
“The system was running on an incumbent platform for 25 years. Moving away from a two-decade incumbent to sign with Pro Medicus is a data point that speaks for itself.”
The significance is twofold. It highlights both the stickiness of contracts once won and Pro Medicus’ ability to displace long-standing incumbent suppliers.
The third contract win, TidalHealth, includes Full Stack and the Cardiology offering, bringing cardiology contract wins to four, with three expected to go live in 1Q2027.
RBC Capital explains TidalHealth, at $16m over seven years, includes three hospitals serving communities across Delaware and the eastern shores of Maryland and Virginia.
The transaction-based contract implies annualised revenue accretion of around $2.3m.
The Pro Medicus moat vindicated
Regarding recent renewals of more than $141m, RBC points to Allegheny’s five-year renewal for $28m. The transaction-based contract implies annualised revenue of around $5.6m, more than double the approximately $2.4m generated under the previous contract.
RBC observes the implied annualised revenue of around $3.2m is an around 78% upgrade from the previous contract of around $1.8m of annualised revenue.
Significantly, analysts stress Allegheny retained the same contract length rather than shortening the term, as some SaaSpocalypse narratives had implied. The addition of the Workflow module further supports the stickiness and moat of the Pro Medicus’ offering.
Macquarie notes three substantial contracts, including Allegheny, have been renewed since February, all retaining five-year terms, higher fee-per-click pricing and, in some cases, product upgrades.
Northwestern and MedStar were the other renewals, with the latter adding Cardiology.
In the latest news, Pro Medicus has announced yet another renewal, this time with The Ohio State University Wexner Medical Center for $16m over five years, including an expansion of the product uptake to Workflow and Cardiology.
Although this renewal is relatively small, it confirms the trend and cadence of renewals for five-year tenures as well as the uplift in products signed with new modules.
Analysts argue the wins and renewals go a long way towards dispelling concerns that AI could lead to shorter or lower-value contracts.
Channel checks support AI resilience
Morgans conducted multiple US channel checks with hospital decision-makers and came away with some notable observations.
Against a more challenging backdrop, where 77% of hospitals now consider return on investment the most important purchasing criterion, up from 50% in 2023, payback periods have compressed to around 18 months from three years.
For Pro Medicus, which offers 20%-25% more reads per radiologist at speeds 60%-70% faster, supported by fifteen years of clinical outcomes data, Morgans believes Visage’s productivity advantages and installed base strengthen its competitive position in major tenders.
The broker’s channel checks suggest the US enterprise Picture Archiving and Communication System market has effectively become a two-horse race between Visage and Sectra.
Macquarie observes market share is now above 10% and progressing well to achieve the analyst’s forecast 15% by FY30.
Legacy vendors such as Philips and GE Healthcare are increasingly excluded from major hospital tenders due to weaker cloud capabilities and less sophisticated clinical workflows.
In a recent large health system request for proposal, the final decision came down to Visage and Sectra, with Pro Medicus prevailing on the strength of its single-platform architecture and pixel-on-demand streaming technology.
Morgans believes Pro Medicus benefits from a structurally narrow competitive field in large academic medical centres and integrated delivery networks, where proven cloud deployments, implementation track records and reference customers are becoming increasingly important selection criteria.
Regarding AI, CEO Hupert pushed back on market concerns, arguing the technology is more likely to represent a significant growth opportunity. The company is already using AI internally to improve developer productivity.
He also noted Visage sits between the imaging equipment and the reading workflow, irrespective of whether the reader is human or AI, meaning the platform monetises the transaction in either scenario.
Morgans highlights Visage’s 100% renewal rate and notes FY26 is shaping up as Pro Medicus’ second-best sales year on record. New customer wins continue to accelerate, while Hupert points out FY26 contract value of $400m is more than double the level achieved just two years ago.
Like many SaaS companies, Pro Medicus has been caught up in a de-rating driven by AI-related disruption fears.
Hupert’s counter-argument: “I also think that our recent wins and recently announced long-term contract renewals tend to disprove the theory that all software companies will be negatively disrupted by AI.”
Macquarie tweaks earnings forecasts and lowers its target price to $221 from $244 due to earnings changes and a lift in the risk-free rate to 4.21% from 4.12%.
Morgans’ call to action is a Buy rating retained with a $210 target price, while non-daily monitored broker RBC Capital retains a Sector perform rating with an unchanged $195 target price.
FNArena’s consensus target is $218.667 supported by six Buy-equivalent ratings from daily monitored brokers, including Macquarie and Morgans.
The share price remains well below the consensus target price having rallied by almost 48% off a 52-week low in January of $107.75.
The author owns Pro Medicus shares.
Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided.
FNArena is proud about its track record and past achievements: Ten Years On
Click to view our Glossary of Financial Terms
CHARTS
For more info SHARE ANALYSIS: PME - PRO MEDICUS LIMITED
