Is Pro Medicus (ASX:PME) a Buy After the 34% Pullback?

Pro Medicus slips, growth momentum remains

Pro Medicus (ASX: PME) has dropped approximately 34% from its record high of A$336 in July 2025 and now trades near A$222. Investors are asking if Australia’s top-performing stock has finally slowed down. For context, this company has delivered 54,000 per cent returns over 15 years, making it a standout ASX success story. Yet what makes this pullback particularly interesting is the signal from the top.

In September 2025, CEO and co-founder Sam Hupert increased his direct stake via a transfer of shares valued at A$299. More recently, as the stock stabilised near A$222 in late December, Hupert returned to the market to purchase additional shares through his family trust. Even with the price sitting A$114 lower than its July peak, the fact that the founder is adding to his multi-billion dollar holding, rather than selling, is a powerful signal of conviction in the company’s long-term growth.

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Why Pro Medicus Fell- And Why It Might Not Matter

The pullback appears driven by profit-taking after an extraordinary run rather than any business problems. After gaining 161 per cent in 2024 alone, a pullback was bound to happen after such a big run. The P/E ratio has dropped from above 300 times to around 200 times, which sounds expensive until you see what the company is actually delivering.

Contract wins are speeding up, not slowing down. In FY25, Pro Medicus signed A$520 million in new contracts, including its largest-ever deal with Trinity Health at A$330 million and an A$170 million agreement with UCHealth. US market share has grown from 7 per cent to roughly 10 per cent, yet that still leaves 90 per cent of the market up for grabs. With 60 cents of every global healthcare dollar spent in America, the growth runway remains huge.
These are not one-off wins either. They are 10-year contracts with built-in growth as hospitals perform more scans over time, meaning actual revenue could beat headline values.

The Numbers Behind the Noise

The financial results show the company is performing strongly across all areas. FY25 revenue hit A$213 million, up 31.9 per cent year-on-year, while net profit jumped 39.2 per cent to A$115.2 million. Those are strong numbers for any software company, but the quality metrics are even better.

Underlying EBIT margins reached a record 74 per cent in FY25, a level most software companies can only dream about. Pro Medicus holds A$210 million in cash with zero debt. Perhaps most impressive is the efficiency: just 132 employees generated A$213 million in revenue. That works out to A$1.6 million per employee, ranking among the highest in global software. The forward revenue pipeline has surged, with total minimum contracted revenue now approaching A$1 billion over the next five years.

The Investor’s Takeaway

The bull case rests on the idea of quality at a lower price. The company is growing more than 30% with margins of 74%, so it was never going to be cheap. But the valuation has eased- trading at 200 times earnings now compared to 300 times a few months ago. The fact that the director has kept his stake at much higher prices shows confidence. And with healthcare moving steadily towards digitalisation, strong growth looks set to continue for years.

The bear case is straightforward. Even at 200 times earnings, the valuation leaves little room for mistakes. Competition from giants like GE Healthcare, Philips, and Siemens could intensify, and the company’s reliance on large US contracts continues to pose concentration risk.

Our view is that Pro Medicus looks attractive for growth investors with a three-to-five-year horizon who can handle volatility. Business quality is exceptional, the competitive moat is widening, and management has a 40-year track record. However, the valuation demands continued strong delivery. Conservative investors may prefer waiting for further pullback, while growth investors could consider building a position at current levels.