Sorry to be somewhat late in replying but as a former long term...

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Veritas2000

12,675 Posts.

1038

26/05/22

16:51

Post #: 61642845
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Originally posted by Plague: ↑

PME is around 1% of my portfolio, I want to get it to 5-6%. Premium companies deserve a premium, 100% gross margins of which 45% goes to the bottom line, high rates of organic growth, clean balance sheet, co-owners highly aligned (26% of capital each), 39% return on capital. The economics of this business are eye-watering but so is the valuation.

Strong history of increasing revenues especially recurring revenue with even further upside depending on transactions. 62m cash, no debt.

What does the future look like?

Much of the same quality organic growth. Getting the software into universities and medical training facilities is a masterstroke so that new graduates are trained and comfortable with the platform (Network effect).

What's it worth?

Analysts expect EPS of 0.675 in 2024, current share price of 46.70 implies a forward p/e of 69.17. Premium companies deserve a premium but a 70 multiple is very high. Around 45 is more attractive if interest rates do rise which would imply a share price of $30.37.

Very interested to get others thoughts, i've always been better at finding great businesses rather than calculating (or guessing) their intrinsic value although i've found it is always better to buy shares in a company with a intrinsic value that is increasing rather than buying a deep discount that's a melting ice cube and slowly erasing value.

Cheers,
Plague.

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Sorry to be somewhat late in replying but as a former long term holder of this quality stock run by quality management may I offer some points;

PME has always traded outside the bounds of what is typically textbook metrics applied to quality companies and, investors have been happy to pay the appropriate share price - albeit at what some may perceive as being a premium. Indeed most industry commentators over the years have referred to the company as being a gold class investment.

For instance, only last year, in April 2021 their valuation increased by $1.4B to $7.3B and this year the price has suffered as a result of global inflation.

Finally, adding in a weekly chart I would be content to suggest that it could potentially bounce from this level.

PME Price at posting: $40.66 Sentiment: Buy Disclosure: Not Held
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