Pinned straw:
Thursday 2nd May 2024: PME have just made another all time high today - a intraday high of $112.59 before closing at $112.10.
PME, you've done it again!
And I still do not own any PME in my real money portfolios - just here on Strawman - where I paid between $20.16 and $27.87 per share back in the first half of 2020, and that position is showing a +50.92%p.a. return over the past 4 years despite me trimming the position all the way up. Just couldn't bring myself to pay up for them with real money, as they always look fully priced or expensive, however they just keep on rising regardless!
thunderhead
What a powerhouse this has been, with all metrics heading in the right direction including the generous multiple the market is willing to slap on the earnings - it's the holy grail, and the 100-bagger status of the stock is the proof.
Got away for me too...except that was from when it was sporting a $1.x handle!
I only have myself to blame, having spurned the rare but still plentiful opportunities to add some several bags ago.
Strawman
I feel your pain @Bear77
And the valuation of Pro Medicus makes little sense to me too. Even though I think it can and will throw off ever increasing amounts of cash and is largely bullet proof.
Over the last 5 years, PME has grown EPS by a very enviable 37%pa. And it's done that while paying ~50% of profits out as dividends, no debt and without any material issue of new shares.
Amazing.
Back in 2019, it was already a $2 billion company. And even then it was on a forward PE of ~100x. Today its market cap is almost $12 billion and the forward multiple is ~150x.
The consensus growth in per share earnings over the next few years is 30%. Let's assume it's even better at 35% and that that is sustained through to FY2030, to get a value of $3.50 in per share earnings.
If we want an average annual return of 10%pa, (and let's just ignore the 0.3% yield to keep things easy) PME would need to be trading at a FY30 PE of ~58x, and that would make it a >$20b company. At that price, it'd be one of the top 20 largest companies on the ASX, and roughly equivalent to something like REA group, which currently does $2.85 in EPS and is expected to do roughly $3.50 in EPS in FY24.
Is that possible? Sure, very much so. But the point is even if it does exceed growth assumptions and sustains a very high PE, investors will get ~10%pa. Maybe you see a $20b company on a PE of 80 and you get a 15% average annual return.
But so much is dependent on the company trading at a multiple that is exceptionally rare for a large company.
What if EPS growth is "only" 30%pa through to FY30, and the PE is "only" 45? That gives a target price of ~$125, which is <2>
Anyway, i'm just salty having sold out at much lower levels.
