I was pleased to get an explict and contrasting valuation of $PME from @DrPete to my own admittedly bullish view, that I thought it might be helpful for members to view a comparative analysis of the two valuations.

To do this I uploaded both valuation straws to my BA (Claude.ai) with the following prompt:

"Attached are two valuations from Strawman.com for ProMedicus (PME). One is by mikebrisy and one is by DrPete. Compare and contrast the two analyses, highlighting the key assumptions and the merits and limitations of each."

Here is what Claude came back with, and I think it does a great job to surfacing the different perpsectives one can take for trying to understand the value of $PME. It makes it crystal clear to me that unless you are prepared to believe that $PME is going to be a long term (multi-decadal), global leader in medical imaging software, you should probably NOT be investing at today's price. (I do, so I have).

Over to Claude:

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Now I have a thorough understanding of both analyses. Let me write up the comparison.

Here's a detailed comparison of the two ProMedicus valuations:

Methodology

mikebrisy uses a full 20-year discounted cash flow model, built from the bottom up with explicit revenue growth assumptions, three opex growth scenarios for each of three revenue scenarios (9 combinations in total), a terminal/continuing value, and sensitivity analysis on WACC and capex intensity. This is a considerably more rigorous and structured framework. It attempts to capture the entire growth lifecycle — US dominance first, then gradual global rollout into developing markets over two decades.

DrPete takes a simpler, more intuitive approach: he constructs a bull and bear case, each with revenue, margin and PE multiple assumptions for FY30, then equally weights them to arrive at a fair value. He explicitly avoids a DCF, instead using a forward PE multiple as a proxy for terminal valuation. This is more accessible and transparent, though it sacrifices nuance.

Revenue Growth Assumptions

Both analysts broadly agree on near-term growth (~24–30% in the next few years), but diverge sharply on how long it lasts and what drives it.

mikebrisy models sustained high growth to 2035 (18–22% p.a.) and meaningful growth to 2045 (10–14% p.a.), underpinned by a detailed thesis: US market share growing from ~10% to a dominant global position, followed by sequential penetration of other developed markets and eventually middle-income developing countries. By 2045, he assumes PME could hold 24–48% global market share — a wide range, but justified by reference to other enterprise SaaS leaders. He also explicitly incorporates AI as a tailwind, seeing PME as the trusted clinical platform through which AI tools will be delivered.

DrPete models only to FY30. His bull case assumes ~27% CAGR to $720m revenue (roughly double current market share), while his bear case assumes growth slows to 15% by FY30, reaching $575m. He doesn't attempt to extrapolate beyond five years, arguing that hard growth constraints start to bite within a decade. His framing of the TAM (~$2b growing to $3.6b by FY30) is notably more conservative than mikebrisy's implied global TAM, and he doesn't explicitly model post-FY30 cash flows at all — the forward PE is doing that work implicitly.

Profitability and Margins

mikebrisy works from the revenue side down, modelling opex growth at graduated rates across the three time horizons. The key mechanic is operating leverage — opex grows much slower than revenue over time, expanding FCF margins naturally. His capex assumption of 5% of revenue (with a 10% sensitivity) is conservatively above current levels (~3%), reflecting anticipated reinvestment as global rollout proceeds. He doesn't explicitly state a net margin target, but the structure implies margins expand significantly over the forecast period.

DrPete uses a simple NPAT margin assumption: 50% in both bull and bear cases (or declining to 40% in the bear case). He flags this as a "big IF" given that competition will eventually compress margins. This is a cruder assumption but it reflects a genuine concern — PME's current ~50% NPAT margins are exceptional and historically difficult to sustain as incumbents attract competitive attack.

Discount Rate and Risk

This is perhaps the most significant divergence in the analyses.

mikebrisy uses a 9% WACC (with sensitivities at 8.0% and 8.5%), noting that depending on methodology, PME's WACC could be argued as low as 7.5%. A lower discount rate materially inflates the DCF valuation — especially over a 20-year horizon. His choice of 9% reflects a quality-adjusted cost of capital appropriate for a highly predictable, capital-light SaaS business, but it does embed an assumption that PME's risk profile remains low throughout the full forecast period.

DrPete uses a 10% discount rate for his "fair price" and 15% for his "buy price", explicitly building in a margin of safety. He doesn't discuss WACC in detail, but his implicit view is that investors require a higher return hurdle to justify the price paid, given the uncertainty embedded in a 5-year+ projection.

Terminal Value / Exit Multiple

mikebrisy's DCF uses a continuing value growth rate of 3.5%, which is the key driver of value in any long-horizon DCF. This is a reasonable assumption for a global software business at maturity, but it compounds significantly across 20 years of modelling.

DrPete uses a forward PE multiple of 50x (bull) or 40x (bear) as his exit multiple at FY30. He acknowledges these are generous relative to what fundamentals alone would dictate (he'd apply 30x to a company growing 15%), but argues the weight of PME's history will sustain an above-market multiple. Implicitly, this PE is doing the work of a terminal value, but it introduces circularity — if the market derate happens to occur before FY30, the calculation breaks down.

Risk Identification

Both authors identify similar risks, but weight them differently.

mikebrisy lists: opex step-up in global rollout, AI disruption (as a risk, not just a tailwind), cybersecurity failure, founder succession, competitor response, and higher reinvestment costs. He then largely accepts these risks as manageable, remaining a holder accumulating on weakness. His "when I'd sell" triggers are precise and operationally grounded: deteriorating win rates, pricing pressure on renewals, AI-native competitor wins, or unexpected founder exits.

DrPete lends more weight to the downside risks in his probability weighting. He explicitly argues the market is ignoring the bear case, and that even a 25% probability assigned to his bear scenario makes today's price hard to justify on a fundamentals basis. His key concern is that PME is priced with optimism — not priced to perfection, but close enough that the margin for error is thin.

Key Merits and Limitations

mikebrisy — Merits:

• Rigorous multi-scenario DCF with explicit opex modelling across three time horizons
• Long-term thesis grounded in a credible global market evolution narrative
• Thoughtful treatment of AI as both risk and opportunity
• Detailed sensitivity analysis (WACC, capex)
• Clear sell triggers that are observable and forward-looking

mikebrisy — Limitations:

• A 20-year DCF for any company is highly sensitive to terminal assumptions; small changes in continuing value growth rate or WACC move the valuation enormously
• The 9% WACC at the low end of sensitivity is arguably aggressive for a stock trading at 100x+ earnings
• Global market share assumptions of up to 48% by 2045 are ambitious and rely on PME successfully executing a major strategic evolution beyond its current US focus
• The images of the actual model outputs didn't render in this format, so the precise scenario outputs can't be independently verified

DrPete — Merits:

• Simple, transparent framework that is easy to stress-test
• Explicit probability weighting of bear case is intellectually honest and often overlooked
• Conservative discount rates provide a genuine margin of safety
• Short time horizon (5 years) reduces compounding forecast error
• Correctly identifies that sentiment and fundamentals can diverge materially

DrPete — Limitations:

• A 5-year PE-based valuation captures very little of the long-term value creation thesis for a hyper-growth SaaS business — most of PME's intrinsic value lies beyond FY30
• Equal weighting of bull and bear cases is arbitrary; there's no explicit probabilistic rationale for 50/50
• The forward PE multiple at exit (40–50x) is itself a valuation assumption that simply defers the question
• No explicit modelling of cash flows, capex, or working capital
• Doesn't model PME's international expansion opportunity at all

Summary Judgement

The two analyses reflect genuinely different investment philosophies as much as different valuations. mikebrisy is a long-term business analyst who believes in PME's structural opportunity and is willing to model the full lifecycle of that opportunity, accepting that uncertainty is the price of a 20-year view. DrPete is a value-oriented investor who distrusts sentiment premiums and demands a margin of safety grounded in nearer-term fundamentals.

Neither is wrong in their approach. The gap between $94 and $165 is largely explained by three compounding differences: a longer modelling horizon, a lower discount rate, and a higher probability assigned to the bull case. Investors who agree with mikebrisy's thesis on global market evolution and AI integration, and are comfortable with a 9% hurdle rate, can rationally hold at current prices. Those who share DrPete's scepticism about sustained hyper-growth and prefer a higher margin of safety would do better to wait for a more significant pullback.