Pro Medicus builds cloud-native medical imaging software that hospitals use to view and manage patient scans. At A$116.97 versus fair value A$54, the stock trades at a 116% premium. The market prices in sustained 30%+ growth at peak margins for over a decade—a thesis requiring perfection across every dimension with zero competitive response.

Best fit: Growth and quality investors willing to wait. The business delivers 29% revenue growth with 250%+ returns on capital and fortress financials. Contracted backlog provides three to five years of visibility rare in high-growth companies. However, entry timing is critical—current valuation prices in a decade of perfection. Suitable for patient capital that can wait for valuation normalisation to A$50-65 before establishing positions.

Pro Medicus builds Visage 7, a cloud-native enterprise imaging platform that hospitals use to view, store, and manage medical scans. The company earns transaction-based fees each time a clinician accesses an image—a model generating 99.9% gross margins with near-zero variable costs. Revenue is 90% North American, concentrated in large hospital systems under five to ten year contracts.

FY25 delivered 32% revenue growth to A$213 million with EBITDA margins expanding to 78%. Seven major implementations are scheduled for H2 FY26, including the largest PACS deployment in industry history (Trinity Health, 93 hospitals). The A$1 billion contracted backlog provides rare forward visibility for a growth company.

The investment case rests on a structural moat: PME is the only true cloud-native imaging platform at scale. Proprietary streaming architecture loads images in seconds versus minutes for competitors, driving implementation times one-fifth of peers. This advantage compounds through reference customer effects—eleven of the top twenty US hospitals now use Visage 7.

At A$116.97 versus fair value A$54, the stock is overvalued by 116%. The market embeds sustained 30%+ growth at peak margins for fifteen-plus years with zero competitive response—a thesis requiring perfection across every dimension.

What happened: H1 FY26 revenue grew 28% to A$124.8 million, driven by major contract implementations ramping faster than expected. EBITDA margins held at 76%, down modestly from FY25's peak 78% as implementation-driven hiring accelerated (employee costs up 44%). Free cash flow conversion remained at 90%. Seven go-lives are scheduled for H2 including Trinity Health's 93-hospital system—the largest PACS deployment in industry history. Management confirmed the A$1 billion contracted backlog and noted sales velocity has doubled.

What's next: H2 FY26 should deliver revenue acceleration as the seven scheduled implementations go live. Full-year revenue is expected to reach A$275-290 million (29% growth). Near-term catalysts include the Heidelberg University Hospital go-live in Europe (March 2026) and RSNA conference contract announcements (October 2026). The cardiology module is gaining traction with "material dividends" expected, though specific contract wins have not been disclosed. Growth remains above 20% through FY27, supported by the contracted backlog. The key uncertainty is margin trajectory—employee cost normalisation will determine whether EBITDA margins sustain at 73-76% or compress toward 68-70%.

What could go wrong: The valuation gap is the primary risk. PME trades at 75x EBITDA versus peer median 38x—double the multiple for a business scoring 8.4/10 quality versus peer average 7.0/10. The 1.4-point quality advantage does not justify a 97% multiple premium. Any growth deceleration or margin disappointment triggers disproportionate compression given the elevated starting point. This is not a business risk but a price risk—the underlying operations remain exceptional.

The second risk is Epic Systems entry. Epic controls 38% of US hospital EMR systems and could leverage this position to enter imaging via acquisition or product development. A 20% probability of entry within three years would cap PME's addressable market share and compress pricing power, worth approximately A$21 per share in downside. Early warning signals include Epic M&A announcements or PME losing request-for-proposal competitions citing Epic integration as the reason.