The latest expert views on two S&P/ASX 200 Index (ASX: XJO) healthcare shares have just come in.

It's positive news for shareholders of both companies because the broker has improved the rating of those businesses.

Healthcare is an interesting sector for investing in. It's seen as defensive because many of them can benefit from ongoing patient demand, regardless of the economic situation – most people don't choose when to get sick. I'd imagine being alive and healthy is a priority for most people, so they'd be willing to spend on healthcare services.

But, there are also some positive tailwinds for the sector, including an ageing population, a growing population and increasingly advanced healthcare treatments.

Let's look at two of the latest ratings.

Pro Medicus Limited (ASX: PME)

Pro Medicus describes itself as a leading medical imaging IT provider. It provides a range of radiology IT software and services to hospitals, imaging centres and healthcare groups around the world.

The broker Citi has just increased its rating on the ASX 200 healthcare share to neutral. Citi's price target on Pro Medicus was raised to $61. A price target is where the broker thinks the share price will be in 12 months from when the call was issued.

Therefore, the broker doesn't think the Pro Medicus share price is going to move much from here.

In the company's FY23 half-year result, it reported that revenue went up 28.3% to $56.9 million, while net profit after tax (NPAT) improved by 31.5% to $27.2 million.

The Pro Medicus boss Dr Hupert said that the company's pipeline remains strong:

We have a very good spread of opportunities across different market segments, with opportunities in academic/IDN, corporate and private markets. Pretty much all of them are cloud-based with a growing number looking for our "full stack" solution which includes all three of our modules, namely Viewer, Archive and Worklist; a trend we see continuing.

Sonic Healthcare Limited (ASX: SHL)

The other ASX 200 healthcare share that Citi likes the look of is Sonic Healthcare, the global pathology business.

Citi increased its rating on Sonic Healthcare to buy. The price target on Sonic Healthcare is $36. That implies a possible rise of 8% for the business.

While the business saw the FY23 half-year earnings drop as COVID-19 testing slowed, its profit is still significantly higher than the FY20 first half – the pre COVID times. Compared to HY20, the FY23 half-year total revenue was up 22%, operating cash flow was up 47% and net profit after tax (NPAT) was up 50%.

Its non-COVID testing revenue and earnings continue to grow, as does the dividend. It has a progressive dividend policy, meaning that the board wants to grow the dividend each year.

The ASX 200 healthcare share is focused on automation and other efficiency gains, as well as procurement savings, which could help it maintain and grow its margins.

Sonic Healthcare is also hoping to win more outsourcing contracts from hospitals and other healthcare providers. It's also progressing "additional acquisition opportunities to add to future growth."

The post 2 ASX 200 healthcare shares just upgraded by Citi analysts appeared first on The Motley Fool Australia.

The fund manager Wilson Asset Management (WAM) has revealed two ASX shares that could deliver good earnings growth in the coming years.

WAM tries to fund undervalued growth companies that could outperform the market. Ideally, the investment team aims to find a catalyst that can accelerate returns for investors.

The fund manager runs a number of listed investment companies (LICs) including WAM Capital Limited (ASX: WAM) and WAM Leaders Ltd (ASX: WLE).

Every month, WAM likes to pick out some of the ASX shares that it thinks have compelling futures. Below are two of them, which are growing worldwide.

Pro Medicus Limited (ASX: PME)

WAM describes Pro Medicus as a business that provides medical imaging software and services to hospitals, imaging centres and healthcare groups worldwide.

The fund manager noted last month that the business announced it had signed a seven-year, $25 million contract with the University of Washington for its academic health system.

The ASX share also announced a $12 million contract with Oregon-based Samaritan Health Services spanning eight years, which has a network that includes five hospitals.

WAM pointed out that contracts will see its cloud-engineered imaging platform implemented at the institutions and will reinforce Pro Medicus' "strong presence" in the north west region of the US.

The fund manager explained why it's optimistic:

We expect its strong sales pipeline will continue and we look forward to the possible announcement of new contracts in the months to come.

Pro Medicus recently reported its FY23 half-year result which showed revenue growth of 28% and net profit after tax (NPAT) growth of 31.5%.

PWR Holdings Ltd (ASX: PWR)

WAM described PWR Holdings as a business that specialises in cooling products and solutions to the motorsports and technology sectors.

In January, the company announced that it had acquired Bespoke Motorsport Radiators (BMR), which is reportedly one of the leading manufacturers and suppliers of high-performance motorsport radiators, intercoolers and oil coolers in the UK.

BMR has a four-year average revenue of £520,000 per annum.

WAM said that it's expected that BMR will operate as part of PWR Holdings Europe and expand the ASX share's manufacturing capabilities.

The fund manager explained:

We believe the acquisition will continue to expand PWR Holding's European business and strengthen its ability to execute large projects over the medium-term.

The post 2 ASX shares to buy with exciting global growth potential: fund manager appeared first on The Motley Fool Australia.

1) It's turning out to be a tough day for the S&P/ASX 200 Index (ASX: XJO), down 92 points or 1.2% in early afternoon Wednesday trade.

The big four banks are doing most of the damage, coming after Commonwealth Bank of Australia (ASX: CBA) reported first half results. More on that below.

The biggest faller in the ASX 200 is the Corporate Travel Management Ltd (ASX: CTD) share price, down 8% to $15.86 despite guiding to a record full-year profit and saying "travel demand remains strong with no signs of macroeconomic factors impacting the recovery". 

Based on the share price reaction, the market sees things differently. Corporate Travel Management shares have plunged 38% from their 52-week high despite a very strong travel recovery. Animal spirits and speculation may have seen Corporate Travel Management shares previously get ahead of themselves. Investing can be tough. 

2) Tough crowd these stock market investors, with the Commonwealth Bank of Australia share price falling 6.1% despite it reporting a 9% lift in cash profit and a hefty 20% hike in its interim dividend.

According to the Australian Financial Review, investment bank Barrenjoey "has warned analysts are likely to downgrade profit margin forecasts for CBA after its net interest margin – as a key measure of profitability – peaked in October".

"Given CBA is trading on 19x P/E, we expect the shares to be soft today."

I've been wrong on CBA shares for as long as I can remember. More recently, in August last year, with the CBA share price trading around $100, I said it looked "downright expensive".

That didn't stop CBA shares recently hitting an all time high of $111, although with the CBA share price now trading at around $102 after today's sell-off, and Barenjoey calling out the high valuation, I feel a fraction closer to the mark.

Putting the CBA results to one side, from a "Team Australia" perspective, it was heartening to see CEO Matt Comyn say consumer spend is remaining resilient, with the bank remaining optimistic that a soft landing for the Australian economy can be achieved.

3) This is in stark contrast to outspoken columnist Christopher Joye who, writing in the AFR, recently said "in their quest to crush inflation, central bankers are going to crush everything".

Joye says the number one focus of central bankers is demand destruction as they are singularly committed to creating job losses to reduce elevated wage growth.

"The bottom line is that this is bad news for everything except cash. It means lower earnings and income growth, deeper economic retrenchments, and lower valuations as the risk-free hurdle rates inexorably rise. It means the coming default cycle is probably going to be the worst we have seen since the 1991 recession, which will be terrible for anyone who has lent money to risky borrowers or invested in junk debt."

This is hardly the stuff of soft landings.

So who is right? CBA or C Joye?

I have no idea. The optimist in me struggles to think we're heading for a deep recession. Like CBA, I see consumers still spending and restaurants still busy. The unemployment rate remains hovering near half-century lows at just 3.5%.

Yet storm clouds are ahead. 

With the Reserve Bank of Australia's latest cash rate hike, which marks the ninth increase since May, households are preparing themselves for increased mortgage repayments.

Consumer confidence has plummeted, sinking to its lowest levels since the early days of the pandemic. 

The AFR reports today that TD Securities is tipping the Reserve Bank of Australia to take its terminal rate to 4.35%, a full 100 basis points – or four more lots of 25 basis point hikes – ahead of the current cash rate of 3.35%.

That just might "crush everything," including CBA's prediction of a soft landing.

4) Meanwhile, at Wesfarmers Ltd (ASX: WES), consumers are continuing to spend up, with sales at value-orientated retailers Kmart and Target up an impressive 24% for the first half of FY23. Wesfarmers also reported sales growth at Bunnings and Officeworks, albeit more modest single-digit percentage gains. 

In aggregate, the conglomerate reported profits up 14% and increased its interim fully franked dividend by 10% to 88 cents per share. 

Like others, they see the storm clouds ahead, although Wesfarmers says its "strong value credentials and low-cost operating models mean they are well positioned to meet changing customer demand as customers adjust to cost pressures".

On a day when the ASX 200 is taking it on the chin, the Wesfarmers share price is up 1% to $49.20 where it trades on around 23 times forecast earnings and on a forecast fully franked dividend yield of 3.7%. 

Like a number of high-quality ASX blue chips, Wesfarmers shares are still trading on a valuation that's appropriate for a lower interest rate environment. 

If TD Securities is right and the RBA cash rate gets as high as 4.35%, by comparison to Wesfarmers shares, cash in the bank will look very attractive. 

It's hard to see Wesfarmers shares being "crushed" but the risks might be more skewed to the downside. A re-rating to a forward P/E of 20 times implies a Wesfarmers share price of $43.50. 

5) One stock whose valuation continues to defy conventional logic is healthcare imaging software company Pro Medicus Limited (ASX: PME). 

The company reported solid first-half revenue growth, up 28% to $57 million, with net profit up 32% to $27 million.

Pro Medicus has been winning long-term contracts with US healthcare companies. Such a high level of recurring revenue, coupled with clear operating leverage as demonstrated by a near 50% net profit margin, would deservedly translate to a premium valuation for Pro Medicus. The company is debt-free and sits on cash reserves and other financial assets of $94.5 million.

For a company with around $100 million of annual sales, Pro Medicus sports an eye-watering market capitalisation of $6.73 billion. It trades on roughly 116 times forecast earnings. 

If Pro Medicus grew profits at 25% per year for the next five years – no mean feat – my back of the envelope calculations would have Pro Medicus shares trading at 32 times earnings, something far more palatable and arguably reasonable at that stage. 

In effect, growth for the next five years could arguably already be priced into Pro Medicus shares. 

Despite all that, I still hold the shares. It's a risk I'm willing to take for one of the highest-quality companies trading on the ASX. 

As investing legend, 99-year-old Charlie Munger has once said…

"The first rule of compounding: Never interrupt it unnecessarily."

Pro Medicus is a core holding of the Hyperion Small Growth Companies Fund. Its stated philosophy is…

"The highest proven quality businesses with the strongest competitive advantages and organic growth opportunities produce superior shareholder returns over the long term."

Whilst I hope to hold Pro Medicus shares for many years to come, I realise I'm unlikely to see the huge gains I've seen since first buying the shares at just $1.50. 

The post ASX 200 in freefall as CBA's prediction of a soft landing might have just been torpedoed by huge interest rate call appeared first on The Motley Fool Australia.

The S&P/ASX 200 Index (ASX: XJO) is tipping into negative territory today as the big four banks act as an anchor. Meanwhile, other ASX 200 shares are getting plenty of attention for their latest results.

Currently, the benchmark index is 1.22% worse off than where it finished yesterday — hovering around 7,340 points. Some of the biggest hindrances to the Aussie market today include Treasury Wine Estates Ltd (ASX: TWE), Lifestyle Communities Ltd (ASX: LIC), and Computershare Limited (ASX: CPU).

That aside, let's dive into three companies that have reported today.

Earnings ignite these ASX 200 shares

One company that is seeing its share price driven higher today is GUD Holdings Limited (ASX: GUD). Shares in the automotive parts and water systems seller are jumping 7.86% to $8.92 as investors absorb what appears to be a solid half-year result.

It was a period of phenomenal growth for GUD in the latest six-month period. Primarily driven by acquisitions, revenue was dialled up 55.7% year-on-year to $517 million. Meanwhile, the company's net profit after tax (NPAT) increased by a blistering 88.7% to $45.6 million.

In terms of outlook, management painted a reasonably positive outlook. The APG brand is expected to benefit from normalisation in sales toward higher historic volumes. Likewise, the remaining automotive business is anticipated to benefit from aging vehicles.

Another ASX 200 share relishing in a commendable result is Netwealth Group Ltd (ASX: NWL). The financial services platform provider's share price is currently up 4.82% to $13.92.

The three key figures that shareholders ought to be pleased with are the company's funds under administration (FUA), revenue, and NPAT.

Ultimately, the business relies upon its FUA on the platform. Fortunately, funds on Netwealth increased 12.2% to $62.4 billion in the first half. Similarly, revenue and earnings were grown to the tune of 18.9% and 12.9% respectively.

Despite a strong performance so far in 2023, the Netwealth share price is still down 6.13% over the past year.

Failure to impress with these figures

The third and final ASX 200 share with robust numbers out today is Pro Medicus Ltd (ASX: PME). The imaging software provider's shares are currently up 0.29% to $65.24 apiece.

Perhaps one of the biggest success stories on the Australian share market may not have lived up to expectations today.

In its half-year report, Pro Medicus served up revenue of $56.89 million — representing an increase of 28.3%. Even better, net profits were 31.5% bigger than the prior corresponding period, perched at $27.19 million.

The improved financials were attributed to some major wins in North America with customers such as Novant Health, Allina Health, and Inova Health.

Nevertheless, it seems investors might be concerned about whether the premium valuation is still compatible following these results. For reference, Pro Medicus currently trades on a price-to-earnings (P/E) ratio of 154 times.

Though, longer-term shareholders couldn't be upset. Shares in the software company are still up almost 41% compared to this time last year.

The post 3 ASX 200 shares on the move amid strong earnings updates appeared first on The Motley Fool Australia.

Higher interest rates and strong inflation are hitting businesses in many different ways.

While valuations of some ASX growth shares are still down significantly, the S&P/ASX 200 Index (ASX: XJO) as a whole isn't down much at all.

In fact, the ASX 200 is close to its all-time high. It had fallen quite a way by June 2022 and at the end of September 2022. But it has significantly recovered since then.

So, with the ASX 200 as a whole doing well, thanks to strong commodity prices and higher projected bank profits, I think the short-term opportunity there has already passed.

However, remember that the ASX 200 has returned an average of around 10% per annum over the ultra-long term. I believe that investors can still do well over the longer term with an exchanged-traded fund (ETF) focused on larger ASX shares, such as the Vanguard Australian Shares Index ETF (ASX: VAS) (though this ETF tracks the S&P/ASX 300 Index (ASX: XKO) ).

Can ASX shares still make mega returns?

Of course, the index is made up of different constituent businesses – the great performers and the ones going through tough times as well.

Over the last decade, names like CSL Limited (ASX: CSL), Pro Medicus Ltd (ASX: PME), and Altium Limited (ASX: ALU) have flourished.

I think there are probably going to be a few names on the ASX now that are on their journey to achieve very good returns. Time will tell which names end up being those big winners.

The Motley Fool can hopefully help identify those upcoming winners, but I think there are a couple of factors that will help generate stronger returns.

First, I'd look for a business that is looking to expand overseas because that increases the total addressable market. This gives the ASX share a bigger growth runway, meaning possible stronger returns. But it's also important to evaluate how effective the business could be at winning market share.

Second, I'd only want to go for businesses that seem like they have good gross profit margins with the potential to become very profitable in the future. I regularly write articles outlining some of the ASX shares that I think could perform very well.

I think smaller ASX shares have more room for growth because they are earlier on in their growth journey, with more compounding potential.

The post ASX shares: Is this my once-in-a-lifetime chance for mega returns? appeared first on The Motley Fool Australia.

In fact, some ASX 200 shares have climbed so much today that they have reached new 52-week highs.

Here are eight that accomplished this feat on Thursday:

Altium Limited (ASX: ALU)

The Altium share price has hit a 52-week high of $39.96 on Thursday thanks to a rebounding tech sector.

Auckland International Airport Limited (ASX: AIA)

The Auckland International Airport share price has risen to a 52-week high of $7.90 this afternoon. Investors appear optimistic that this airport operator will be benefitting greatly from the travel market recovery.

CSL Limited (ASX: CSL)

The CSL share price has continued its positive run and climbed to a 52-week high of $304.75. Morgans is tipping 2023 to be a "break-out" year for the biotherapeutics giant.

Lottery Corporation Ltd (ASX: TLC)

The Lottery Corporation share price has hit a 52-week (and record) high of $4.91 on Thursday. Last week, Macquarie reiterated its outperform rating with an improved price target of $5.10.

Northern Star Resources Ltd (ASX: NST)

The Northern Star share price has hit a 52-week high of $13.31. As you can see below, this means the ASX 200 gold miner's shares are now up 52% over the last 12 months.

Pro Medicus Limited (ASX: PME)

The Pro Medicus share price is on form again and charged to a 52-week (and record) high of $67.99. A rebounding tech sector and some big contract wins have sent this ASX 200 healthcare technology company's shares hurtling higher.

Telstra Group Ltd (ASX: TLS)

The Telstra share price has risen to a 52-week high of $4.18. Earlier this week, Goldman Sachs upgraded the telco giant's shares to a buy rating with a $4.60 price target.

WiseTech Global Ltd (ASX: WTC)

The WiseTech share price has stormed to a 52-week (and record) high of $64.70 this afternoon. This brings the ASX 200 tech share's 12-month return to a sizeable 40%.

The post Happy days! 8 ASX 200 shares smashing new 52-week highs on Thursday appeared first on The Motley Fool Australia.

The S&P/ASX 200 Index (ASX: XJO) peaked at a nine-month high on Wednesday, helped along by five shares hitting their own long-forgotten highs.

Right now, the index is up 0.28% at just under 7,500 points. That's less than 2% off the all-time high it set in August 2021.

Among the stocks rejoicing alongside the iconic index today are some of the market's most recognisable names. Let's take a look at their shiny new 52-week highs.

5 ASX 200 shares soaring to long-forgotten highs

First off the bat is ASX 200 banking giant Commonwealth Bank of Australia (ASX: CBA). It hit another record high today, peaking at $110.81 – a 0.7% gain on its previous close.

Interestingly, there's been no news from the ASX's second largest company, commanding a market capitalisation of $185 billion.

However, its stock has now bested its previous 52-week high for four consecutive sessions.

Joining CBA shares in posting a new 12-month high are those of Rio Tinto Ltd (ASX: RIO). Stock in the iron ore giant rocketed 1.7% earlier today to a high of $128.78.

Investors might be snapping up Rio Tinto shares for the company's exposure to iron ore and copper, or its whopping dividend yield. Whatever the reason, it appears to be good news for the Rio Tinto share price.

And who could forget shares in ASX 200 travel giant Webjet Limited (ASX: WEB)? They launched 2.3% earlier today to reach $7 – the highest the stock has been since the onset of the COVID-19 pandemic.

That's despite only silence from the online travel agent. Indeed, the last time the market heard news from Webjet was back in November. And investors might have more time to wait.

The company isn't expecting to post its full-year earnings until May.

The Treasury Wine Estates Ltd (ASX: TWE) share price is also taking off today, peaking at $14.84 – a 2.2% gain on its previous close and another post-pandemic high.

The company has been tipped to benefit if tensions between Australia and China ease this year.

Finally, also posting a new 52-week high today is ASX 200 healthcare share Pro Medicus Limited (ASX: PME). It soared 1.4% to hit $67.80 shortly after the market opened today.

The stock has been on a roll in 2023, gaining 22% year to date amid news of contracts with Samaritan Health Service and the University of Washington.

The post 5 ASX 200 shares smashing new 52-week highs on Wednesday appeared first on The Motley Fool Australia.

If you're feeling a bit off on Monday, you're not alone. Many shares are also having a relatively tedious day, with the S&P/ASX 200 Index (ASX: XJO) trading 0.16% lower than it was at Friday's close.

Fortunately, that hasn't stopped some overachievers from outperforming. Four ASX 200 shares have posted new 52-week highs this morning.

Here is all you need to know about the quartet trading at long-forgotten heights today.

4 ASX 200 shares posting new 52-week highs

Making the first notable jump this morning is the Pro Medicus Limited (ASX: PME) share price. The ASX 200 health imaging provider's stock rose 2% today to a new 52-week high of $66.42.

The gain came as the company announced a new 8-year $12 million deal with US community-based, integrated delivery network (IDN) Samaritan Health Service.

The deal will see Pro Medicus' Visage 7 Enterprise Imaging Platform replacing legacy systems across Samaritan's network.

Pro Medicus CEO Dr Sam Hupert commented on the news, saying:

IDNs are the largest market segment in North America, and this is our fifth material IDN contract in the last 12 months.

Joining Pro Medicus' shares in posting a new 52-week high today are those of Treasury Wine Estates Ltd (ASX: TWE).

The ASX 200 wine company's stock peaked at $14.47 earlier today. That marked a 0.5% gain and a new post-pandemic high.

Interestingly, there's been no news from the company lately. Though, it has been tipped to benefit from an apparent easing of tensions between Australia and China.

Also in on the action is the TechnologyOne Ltd (ASX: TNE) share price.

It rose nearly 2.2% this morning to reach $15.14 – a new all-time high.

The stock dodged the carnage that plagued the S&P/ASX 200 Information Technology Index (ASX: XIJ) in 2022 and has made the most of the sector's 2023 gains.

It's already risen 15% year to date.

And last but not least is Karoon Energy Ltd (ASX: KAR).

The ASX 200 oil and gas exploration company's shares lifted 1.2% to hit a multiyear-high of $2.45 this morning before slipping into the red.

Today's slump follows a 12% gain posted by the stock over the course of last week amid the release of its December quarterly report.

The post 4 ASX 200 shares hitting new 52-week highs on Monday appeared first on The Motley Fool Australia.

Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Schroders portfolio manager Ray David looks into his crystal ball to reveal the ASX sectors that will be hot this year.

Investment style

The Motley Fool: How would you describe your fund to a potential client?

Ray David: Schroders Long Short Fund, as the name says, it is a long-short fund. So we do take short positions and we do take long positions but, in general, we are about 100% invested in the market. And typically the short positions make up about 20% to 30% of the portfolio. And the funds taken from the short positions are then reinvested back into the market, which then gives us a long position about 120%, 130%. 

It's important to say that we are not betting on the direction of the market. So if the market goes up, we're fully invested, we'll go up too. If the market goes down, our fund will generally decline with the market too. But the short positions look to add additional returns because the benefits of shorting is that we can take advantage of the analysis we do on companies.

If we identify them as poor investments, we'll typically short them to try and enhance the return to our clients. Whereas a long-only investor, they'll just simply avoid those poor-quality companies and move on. So we're playing both sides of the market. 

We're trying to make money by buying undervalued stocks that go up. At the same time, we are trying to short poor quality or overvalued companies that we think the market's overly priced. 

MF: With the long side, I know Schroders is very famous as a value investor. Is that how you would describe it?

RD: Correct. We do spend a lot of time on understanding company valuations. And generally, we are trying to buy stocks that we think are undervalued. 

Typically, when people think of value managers, they might think of investors that are contrarian or buying things that are bombed out. We do try to focus on good quality companies and companies that have, what we say is, durable earnings. So just because a stock is down on its knees doesn't necessarily mean we're going to own it in the fund. We do the work and if we think it ticks a number of boxes, which is, number one, it's undervalued, number two, it's a business that's got a competitive advantage or it's a good quality business, it's got earnings duration. The third point, "Is the management and governance of good nature?" 

MF: 2022 was an unpleasant year for a lot of investors. How did your team go?

RD: The fund did really well. Our total fund return beat the market by about 6% pre-fees. So the market was flat and our fund was net up. 

If we look at our total performance since inception over two-and-a-half years, we've outperformed the benchmark or the S&P/ASX 200 Index (ASX: XJO) by 4.6%. 

When we look at that composition or that performance, 70% of it has come from the long positions and 30% has come from shorts, which is what we would expect with a 130-30 structure. 

So we've been able to deliver performance in volatile markets, which really plays to our skill as a manager that's focused on valuations and sort of good quality companies.

MF: You've picked the most action-packed 2.5 years ever to run a fund.

RD: Sure. We've had COVID in the middle of that. We've had the COVID recovery. We've gone from quantitative easing to quantitative tightening to inflation that's at 40-year highs. 

Even though it's two and a half years, it feels like we've gone through three or four cycles already within that period.

A case in point is some of these retail stocks. Everyone was really bearish on retail names [but] actually were coming out with very strong results. 

MF: That leads to the question of where you think the market is heading this year?

RD: The market, we think, is going to be volatile going forward. 

On an aggregate view, the market is looking fairly priced. It's made up of some really cheap sectors where we see pretty good value, and at the same time, it's made up of expensive sectors. The market's trading on about 14.5 times PE, and its long-run average is about 15. So it's not strikingly cheap; it's not overly expensive. 

But there are sectors which look very expensive historically and sectors which look cheap. The sector that looks cheap in our view, which we do have positions in our portfolio, is general insurance. The energy sector is quite cheap. We're overweight energy.

MF: Energy? Even after the bull year it's just had? 

RD: Yeah, that's right. If you think about the energy sector, they've gone from really unloved to now the market is starting to like them, but the multiples that they're trading on are still quite low. They're trading on about six or seven times earnings, especially something like a Santos Ltd (ASX: STO). 

A lot of these companies have benefited from high energy prices. And energy prices have rolled off, but they never really re-rated to the silly levels that we saw with, for example, the tech companies or the iron ore stocks that we saw in 2015. So energy just looks really good. 

And we think the outlook for energy stocks is attractive because there's just not a lot of supply coming in. No one really wants to invest in fossil fuels or LNG or gas without the high prices to justify the returns, because everyone's quite worried about renewables and the ESG factors.

Then within the overvalued sectors, we still think ASX technology stocks are quite overpriced. If you look at stocks like WiseTech Global Ltd (ASX: WTC), Pro Medicus Limited (ASX: PME), they're actually not far from record highs so they're never really derated in that tech sell-off. 

The other sectors which we think look pretty expensive are real estate investment trusts (REIT) and healthcare. We're quite cautious on real estate investment trusts because they face the triple headwind of declining asset prices because interest rates have gone up, softening rental income, particularly if you're in office and retail, and thirdly, their costs are going up — interest repayments and cost to manage the facilities. 

In summary, the market is fairly priced, but there's still pockets of value and there's pockets of overvaluation. We're looking to exploit our views around valuation versus what's priced by the market.

The post Two ASX sectors to buy right now (and two to avoid like the plague): fundie appeared first on The Motley Fool Australia.

This year has brought good tidings to the S&P/ASX 200 Index (ASX: XJO) and these five shares are among those making the most of it.

They've each jumped as much as 5.8% to reach their highest point in more than a year on Tuesday.

Meanwhile, the iconic index is up 0.44% at 7,490.4 points at the time of writing. That's 7.8% higher than it was at the start of the year.

Let's take a closer look at what's sent these market giants soaring today.

These ASX 200 shares are roaring to long-forgotten heights

The first ASX 200 share posting a new 52-week high is Clinuvel Pharmaceuticals Limited (ASX: CUV). Stock in the biopharmaceutical developer lifted 2.6% to reach $27.42 earlier today – the highest it's been since 2021.

It follows yesterday's news of the company's analogue adrenocorticotropic hormone (ACTH). It's aiming to submit a regulatory drug master file for the product in the second half of this year – an "aggressive goal" according to chief scientific officer Dr Dennis Wright.

The Mineral Resources Ltd (ASX: MIN) share price is also rocketing on Tuesday, hitting a new record high amid a broker upgrade. The stock peaked at $96.78 earlier today – a 5.8% gain.

UBS has reportedly upped its expectations for lithium. It now tips demand to outweigh supply in the near and medium term, the Australian Financial Review reports.

In response, it's slapped a buy rating on shares in the ASX 200 materials giant.

Meanwhile, the TechnologyOne Ltd (ASX: TNE) share price is in the green for a third consecutive day. It follows the release of the company's non-price-sensitive annual report on Thursday evening.

The tech stock reached an all-time high of $14.705 today – marking a 2% rise.

ASX 200 travel giant Webjet Limited (ASX: WEB), on the other hand, popped then dropped today, hitting a post-pandemic high of $6.86 this morning before plunging into the red.

Today's peak saw the stock 1.2% higher than its previous close and around 170% higher than its 2020 low.

Finally, shares in ASX 200 health imaging technology provider Pro Medicus Limited (ASX: PME) have continued to inch towards their all-time high today.

The stock has posted a new 52-week high for a third consecutive session. This time it peaked at $64.77 – a 2.4% jump.

Its gains might be a belated reaction to Friday's announcement, detailing a $25 million contract with the University of Washington.  

The post 5 ASX 200 shares rocketing to new 52-week highs on Tuesday appeared first on The Motley Fool Australia.

S&P/ASX 200 Index (ASX: XJO) healthcare share Pro Medicus Ltd (ASX: PME) is marching higher today, up 1.51% at the time of writing.

That sees the healthcare stock trading for $63.06 per share after hitting $63.35 late this morning, a fresh 52-week high. It's also now less than 4% below the all-time Pro Medicus share price high, reached in August 2021.

What's sending the ASX 200 healthcare share higher?

Investors are rewarding Pro Medicus after the health imaging company announced on Friday that Visage Imaging, its 100% owned United States subsidiary, signed a $25 million, seven-year contract with the University of Washington's UW Medicine health system.

UW Medicine employs 29,000 healthcare professionals, researchers, and educators.

The ASX 200 healthcare share reported UW Medicine will implement its cloud-engineered Visage 7 Enterprise Imaging Platform throughout its network "providing a unified diagnostic imaging platform".

Planning for the cloud-based rollout will start immediately. Pro Medicus expects the first go-lives to commence in the second half of 2023.

Commenting on the contract, Pro Medicus CEO Sam Hupert said:

UW Medicine joins our growing list of Tier 1 academic clients and will provide us with a strong presence in the Northwest region of the United States. With its highly regarded University of Washington School of Medicine, it has the added benefit of exposing Visage to an ever-increasing number of the doctors of tomorrow.

Hupert noted that the contract encompasses all Pro Medicus Visage products.

"Our pipeline remains strong and spans all market segments," he said. "And as has been the case with many of our recent sales, this deal is for our 'full-stack' comprising all three Visage products namely viewer, workflow and archive, a trend we see continuing."

Pro Medicus share price snapshot

As you can see in the chart below, the Pro Medicus share price strongly outperformed over the past 12 months, gaining 40% compared to a 4% gain posted by the ASX 200.

Investors who bought into the ASX 200 healthcare share five years ago will be sitting on some superbly healthy gains of 683%.

The post This ASX 200 healthcare share just hit a new 52-week high. Here's why appeared first on The Motley Fool Australia.

Regular readers would already be aware that the past year has been brutal for ASX growth shares.

Such businesses are valued on their future potential, so when interest rates climb steeply as they did in 2022, growth becomes much more expensive.

But with stock markets considered to be forward-looking, more than one commentator reckons growth is due for a resurgence in 2023.

One such expert is First Sentier Investors head of Australian equities Dushko Bajic, who nominated two ASX shares to watch for a sensational year ahead:

70% boost in profits? Yes, please

Logistics software provider WiseTech Global Ltd (ASX: WTC) largely avoided the crash in growth and technology stocks in 2022, with the share price only 1.15% lower than it was a year ago.

The reasons for the resilience impressed Bajic.

"Amazing result — 24% revenue growth converting into 70% growth in profits and cash flow," he said in a First Sentiers video.

"Return on invested capital rose from 20% to 32%."

The company is reaping the benefits from investing in the quality of its products, he added.

"Organic growth of its software product was 35%."

The number of global freight forwarders that WiseTech has signed in recent years is impressive, but that expansion is still only "part way through".

"Many years to come of strong revenue and earnings growth."

The Motley Fool's Cathryn Goh said last week that WiseTech is in the enviable position of making "mission critical" products for its clients.

"Companies like Toll and DHL rely on CargoWise to execute complex logistics transactions and manage their freight operations from a single platform," she said.

"Demonstrating its stickiness, CargoWise boasts an enviable customer retention rate of 99%. In fact, the software platform has recorded less than 1% customer attrition every year for the last 10 years."

A tech company with 100% contract renewal rate

Similar to WiseTech, heath imaging tech provider Pro Medicus Limited (ASX: PME) also defied the odds in 2022.

The share price is actually 26.8% higher than where it was 12 months ago.

"Quite innovative, generated 35% revenue growth, converted that into 44% profit growth with 100% cash conversion."

Despite the earnings and share price boost, Bajic insisted there is still a "long and large runway" of growth to come.

Hospital consolidation in the US is helping Pro Medicus win new contracts there, but the retention of existing clients is impressive too.

"They've got a 100% renewal rate on their contracts. When they roll over, [they harvest] higher profits, higher volumes and higher prices," said Bajic.

"It's reaffirming the quality of the product and the efficiency it creates [for] its customers."

The post 2 ASX 200 growth shares to watch for a boom 2023: expert appeared first on The Motley Fool Australia.

I love investing in ASX growth shares. And I particularly love investing in ASX growth shares with scalable business models.

Scalability refers to how easy it is to expand a business and grow revenues at a much faster rate than costs. 

How is this possible? Well, scalable businesses have a higher proportion of fixed costs compared to variable costs. 

Take a software business, for example. Once the software has been created, there's typically very little cost involved in rolling it out to an extra customer. 

This can lead to a wonderful thing called operating leverage, where more and more sales dollars fall to the bottom line. 

With that in mind, let's take a look at three ASX 200 shares that benefit from scalable business models.

REA Group Limited (ASX: REA)

To kick things off, REA is the ASX 200 share behind one of the most prominent brands in Australia. 

Realestate.com.au is not only the nation's largest property portal. According to market research firm Nielsen, it's also the seventh-largest online brand in the country. It averages 124 million visits across nearly 13 million people each month, reaching 62% of Australia's adult population.

As a digital business, REA is highly scalable. It can attract new customers with ease, without having to invest significant amounts of capital to grow.

Take its core property portal, for example. REA generates listing revenue when a real estate agency advertises a property on its portal. But crucially, REA collects these fees without having to do much at all. The portal has already been built and it works seamlessly. There are hardly any costs involved in adding an extra property listing to the portal. 

In other words, REA generates this listing revenue at high gross profit margins. 

A fair chunk of this gross profit translates into earnings. In FY22, REA achieved an EBITDA margin of 57% across the group.

Deterra Royalties Ltd (ASX: DRR)

Next up, Deterra Royalties is a lesser-known ASX 200 share with a business model unique to the ASX. 

Deterra was spun off from Iluka Resources Limited (ASX: ILU) in 2020 to separate the mineral sands and royalty businesses.

Deterra currently holds six royalty assets in its portfolio, with its cornerstone asset being the Mining Area C (MAC) Royalty.

Operated by BHP Group Ltd (ASX: BHP), Mining Area C is set to become the largest iron ore hub in the world. It's expected to produce 145 million tonnes of iron ore each year when the recently-completed South Flank expansion reaches full production.

The MAC royalty is revenue-based, with Deterra earning 1.232% of revenue from the MAC royalty area plus capacity payments. As a result, Deterra's business model captures the upside of expansions and extensions without any exposure to the mine's operating costs or capital contributions.

This simple and scalable model enabled Deterra to achieve an unbelievable underlying EBITDA margin of 97% in FY22. As an added benefit for shareholders, the company is committed to paying out 100% of its net profit after tax (NPAT) as dividends.

Pro Medicus Limited (ASX: PME)

Last but not least is a company that I believe is one of the highest-quality growth shares on the ASX.

I recently profiled Pro Medicus as an ASX 200 share with juicy gross profit margins, which goes hand in hand with scalability.

But I think the economics of the business are deserving of another shout.

Pro Medicus is one of the very first companies that spring to mind when I think of operating leverage. It has it in spades. 

For those who are unfamiliar, Pro Medicus is a global leader in radiology imaging software through its Visage technology.

The company's scalability and operating leverage are best seen through its wide profit margins. In FY22, Pro Medicus achieved an EBIT margin of 67%. Put another way, Pro Medicus turned two-thirds of every sales dollar into profit before tax. 

What's more, as the company's topline flourishes, these margins have only been heading higher over time.

The post 3 ASX 200 shares with highly-scalable business models appeared first on The Motley Fool Australia.

We are only three days into 2023 and the expectations of a recession this year are mounting. A tougher economic environment could mean even more pain for ASX shares after an already brutal 12-month stint for investor portfolios last year.

How dire could it really get in 2023? According to the managing director at the International Monetary Fund (IMF), Kristalina Georgieva, quite dire indeed. In a recent interview, Georgieva revealed that the IMF expects one-third of the world economy to be in recession this year.

I'm not concerned about what a company's share price does in the short term. However, a recession can have real impacts on a portfolio. The main concerns for investors, in my opinion, are:

• Potential for companies to go bankrupt, resulting in permanent loss
• Exiting long-term investment strategy due to the psychological toll created by volatility
• Concentrating investments in long-term underperformers

Here's how I plan to recession-proof my ASX share portfolio this year and hopefully not succumb to the above pitfalls.

Short rope for debt dependents

The most at-risk ASX shares of bankruptcy in a recession are those that are unprofitable and rely on debt to fund operations and/or development.

The possibility of interest rates sustaining between 2% to 3% and a slowing economy could make funding harder to come by. If the company can't produce its own capital to continue operations, it could fall on its sword.

To try to avoid a 100% loss, I'll be quick to cut loose any such companies in my portfolio that begin to show signs of financial distress. Furthermore, I won't be deploying cash to any new investments that hold these characteristics in 2023.

One such holding I'm currently wary of is Genex Power Ltd (ASX: GNX). As of June 2022, the clean energy developer was saddled with $322 million in net debt. The company is in the process of a costly endeavour to construct a hydro project, which could put it at financial risk if costs blow out.

Smoother ride with more ASX shares

Often the greatest enemy to our investing success is ourselves. You can invest in the greatest companies in the world but if volatility gets the better of you when the market crashes, you will never enjoy the fruits of your labour — that's where diversification comes in handy.

To recession-proof my ASX portfolio against my own undoing, I plan to hold a greater variety of companies. My portfolio is heavily exposed to the tech industry with approximately a 46% weighting.

For my risk appetite, this is adequate. However, I personally want to keep this below 50% this year so that any drawdown, specifically in tech, doesn't deal too harsh a blow to my psyche.

Dodging the biggest mistake

Investing in 'safe' ASX shares probably isn't something that is usually highlighted as a possible mistake. Yet, I believe it could be one of the most detrimental traps to fall into in anticipation of, and during, a recession.

The inclination to abandon all growth investments and buy blue chips like National Australia Bank Ltd (ASX: NAB) and Telstra Group Ltd (ASX: TLS) might be tempting, but it could lead to severe underperformance long term.

These 'safe' ASX shares have underperformed the S&P/ASX 200 Index (ASX: XJO) by 18% and 42% respectively since June 2008, as shown above.

A small portion of my portfolio is held for defensive ASX shares such as Commonwealth Bank of Australia (ASX: CBA) and CSR Limited (ASX: CSR). However, I will continue to add companies with large opportunities still ahead of them.

Companies like Pro Medicus Limited (ASX: PME) and Jumbo Interactive Ltd (ASX: JIN) operate in underdeveloped and riskier markets. But the lack of market saturation means there could be much more growth in the future.

The post Here's how I plan to recession-proof my ASX share portfolio this year appeared first on The Motley Fool Australia.

How did your stock picking go this year?

It was a tough question to answer over family Christmas lunch this year. Unfortunately for my portfolio, I hold few ASX shares in the resource or utility areas of the market — the two best-performing sectors of the year.

As you can imagine, my 2022 returns have been abysmal, to put it lightly. The majority of my holdings are more tech-centric — which happens to be the worst-performing sector of the year. For context, the S&P/ASX 200 Info Tech Index (ASX: XIJ) is down 37% year to date.

However, it's important not to shift our goalposts. The ultimate success of investing is measured in five- or 10-year time periods. That's why I'm already planning to make the most of next year by buying high-quality ASX shares.

Running attack next year

After a punishing stint for 'growth-oriented' investments, some investors might be tempted to shy away from fast-growing ASX-listed companies. However, I would argue that the next six to 12 months could be extremely opportunistic to add these more forward-looking businesses.

In my opinion, the enticing investments with high-growth potential are Jumbo Interactive Ltd (ASX: JIN), Pro Medicus Limited (ASX: PME), and Imdex Limited (ASX: IMD).

Another one to consider on my list is Objective Corporation Limited (ASX: OCL), with a track record of annual earnings growth in excess of 20%. However, I'd need to see the share price below $8.50 before I felt confident adding this one to the portfolio.

My best defensive ASX shares for 2023

Many are worried about an impending recession next year as interest rates climb to their peak.

I believe the addition of some sturdy companies less susceptible to feeling an economic pinch can help reduce the overall volatility of the portfolio. In other words, these ASX shares are my favourites for 2023 to help me sleep better at night.

The most defensive two, in my opinion, are Sonic Healthcare Limited (ASX: SHL) and AUB Group Ltd (ASX: AUB). Despite any potential economic headwinds, I'd say there's a good chance people will continue to get blood tests and insure their valuables.

In addition to these, I think Lynas Rare Earths Ltd (ASX: LYC) and Codan Limited (ASX: CDA) are more antifragile than some might assume. Rare earths are commonplace in modern technology and are critical in the energy transition — any destabilisation of relationships with China could further exacerbate the problem. Meanwhile, Codan's communications division provides mission-critical products to both frontline workers and the military — areas of the economy that don't stop during a recession.

Income support

Lastly, in the event of a recession, we could all appreciate some extra money flowing in. That's why my final two best ASX shares to buy for 2023 are dividend payers.

Currently yielding 7.6% and 8.8%, JB Hi-Fi Limited (ASX: JBH) and Shaver Shop Group Ltd (ASX: SSG) are two well-capitalised and well-run retailers.

While retail tends to be hit hardest by weak economic environments, I trust these two companies have the balance sheets and the management to navigate the storm. Furthermore, both appear priced as though a tumultuous future is already factored in, trading on price-to-earnings (P/E) ratios of 9 times earnings.

The post I think these are the 10 best ASX shares to buy for 2023 appeared first on The Motley Fool Australia.

No one knows when the next ASX share market crash is going to happen. That's why it's a surprise. But, if share prices were to fall, I think there are quite a few names I'd want to invest in.

For me, a few different factors can make a great investment – choosing something that's growing its underlying intrinsic value, buying it at a good price and being patient to enable compounding to do its thing.

Being patient is up to the investor, as is identifying good investments. But, I think times of market crashes can open up some big opportunities. If the following ASX shares dropped 20% or more, I'd definitely want to think about buying them.

Pro Medicus Limited (ASX: PME)

The Pro Medicus share price has performed remarkably well since the start of 2022 and amid rising interest rates, it's only down 11% for the year.

It provides imaging IT, offering services and solutions to hospitals, imaging centres and healthcare groups around the world. This business can enable healthcare professionals to evaluate images remotely thanks to its cloud-based, high-performance platform.

The business is winning major new contracts in the United States and Europe. It's also renewing contracts at a higher fee rate, which is good for organic revenue growth and improving margins.

This ASX share has an earnings before interest and tax (EBIT) margin of over 60%, meaning that a lot of new revenue turns into profit. It's rapidly growing its dividend for shareholders.

A problematic sticking point is the valuation. According to CommSec, the Pro Medicus share price is valued at 104x FY23's estimated earnings. Even if it fell 20%, it could still seem pretty pricey.

Altium Limited (ASX: ALU)

Altium is another ASX share that is performing strongly internationally.

It provides software for the design of printed circuit boards (PCBs). The company has other areas of business, including Octopart which is a search engine for electrical parts.

This business is benefitting from the world becoming increasingly technological. It has some of the most advanced organisations in the world as customers, such as NASA, Space X, Tesla, Boeing, Lockheed Martin, Apple, Disney, Alphabet (Google) and Amazon.com.

It's expecting to achieve double-digit revenue growth in the next few years as it grows. The company is thinking it's going to achieve scale benefits, leading to a higher earnings before interest, tax, depreciation and amortisation (EBITDA) margin.

I think it's on course for a very promising upcoming decade, but it's currently at a fairly high earnings multiple, so a 20% plus fall would make it seem even more appealing. According to CommSec, it's valued at 55x FY23's estimated earnings.

IDP Education Ltd (ASX: IEL)

IDP Education is an ASX share that provides international student placement and international English language testing.

I think it's a very high-quality business with a lot of earnings leverage. As its revenue is recovering post-COVID, the net profit is growing much quicker. In FY22, total revenue grew by 50%, while net profit after tax (NPAT) surged 161% to $102.8 million.

The business is investing in improved services for its clients, as well as adding more centres to its global network and introducing international English language testing.

However, the IDP Education share price has jumped since the COVID-19 crash as well as from the mid-June 2022 low. According to CommSec, it's priced at 46x FY23's estimated earnings, so it'd be more attractive if it dropped over 20%.

The post 3 ASX shares I'd buy if the stock market crashes appeared first on The Motley Fool Australia.

Thursday was another good day on the S&P/ASX 200 Index (ASX: XJO). It closed 0.53% higher at 7,152.5 points.

In the lead today was the S&P/ASX 200 Utilities Index (ASX: XUJ). The sector soared 1.6% as all three of its constituents gained between 1.2% and 1.7%.

Next best was the S&P/ASX 200 Information Technology Index (ASX: XIJ), rising 1.3% following a strong overnight session for the tech-heavy Nasdaq Composite Index (NASDAQ: .IXIC).

The Wall Street index rose 1.5% on Wednesday's session as United States consumer confidence reached an eight-month high.

There was only one sector trading in the red at the end of today's session. That was the S&P/ASX 200 Materials Index (ASX: XMJ). It fell 0.2% despite BHP Group Ltd (ASX: BHP) officially entering an agreement to buy copper giant OZ Minerals Ltd (ASX: OZL).

So, with all that in mind, which ASX 200 share outperformed all others on Thursday? Keep reading to find out.

Top 10 ASX 200 shares countdown

The top-performing stock on the index today was real estate services business Domain Holdings Australia Ltd (ASX: DHG). It dived 9% on Tuesday after the company released a disappointing trading update.

Today's biggest gains were made by these shares:

Our top 10 shares countdown is a recurring end-of-day summary to let you know which companies were making big moves on the day. Check in at Fool.com.au after the weekday market closes to see which stocks make the countdown.

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

Four ASX shares that are climbing more than most today are listed below. Here's why they are rising:

Argosy Minerals Limited (ASX: AGY)

The Argosy Minerals share price is up 4% to 58.2 cents. Investors have been buying this lithium developer's shares after it provided an update on the Rincon Lithium Project in Argentina. According to the release, current commissioning works have produced a battery quality 99.76% lithium carbonate product. This was achieved during part of the overall development towards commencing the 2,000tpa lithium carbonate operation.

Arafura Rare Earths Ltd (ASX: ARU)

The Arafura share price 4.5% to 46 cents. This may have been driven by bargain hunters swooping in after recent share price weakness. Prior to today, the rare earths developer's shares were down approximately 17% in the space of a week.

Deep Yellow Limited (ASX: DYL)

The Deep Yellow share price is up 7% to 74 cents. This uranium developer's shares were already racing higher prior to the release of a positive announcement this afternoon. That announcement reveals that it has completed its two-stage, 10,000m follow-up reverse circulation drill program at the Omahola project, with positive results delivered and new targets identified.

Pro Medicus Limited (ASX: PME)

The Pro Medicus share price is up 5% to $57.17. Investors have been buying this health imaging technology company's shares after it signed a $15 million seven-year deal with Luminis Health. Pro Medicus' technology will replace legacy PACS throughout the Luminis Health network. Management also revealed that its pipeline remains strong and spans all market segments.

The post Why Argosy Minerals, Arafura, Deep Yellow, and Pro Medicus shares are charging higher appeared first on The Motley Fool Australia.

Investment group Blackrock recently commented on its investment thoughts for 2023, saying:

In equities, we believe recession isn't fully reflected in corporate earnings expectations or valuations – and we disagree with market assumptions that central banks will eventually turn supportive with rate cuts. We look to lean into sectoral opportunities from structural transitions – such as healthcare amid aging populations – as a way to add granularity even as we stay overall underweight.

We like healthcare given appealing valuations and likely cashflow resilience during downturns.

Here are three ASX healthcare shares that could benefit from growing demand for healthcare:

Pro Medicus Ltd (ASX: PME)

Pro Medicus describes itself as a leading healthcare informatics company. It provides a "full range of medical imaging software and services to hospitals, imaging centres and healthcare groups worldwide".

Visage Imaging is a medical imaging solution business. Its platform is "ultra-fast, clinically rich, and highly scalable", the company says.

It is benefiting from society's desire for increasing technological abilities to help medical practitioners and patients.

The ASX healthcare share is winning major new contracts as well as renewing existing contracts. One of the most promising factors about the renewals is that they are being negotiated at a higher transaction cost than the original pay-per-view contract. An example of this was the University of Florida, seven-year, $15.5 million renewed contract.

Over the last six months, the Pro Medicus share price has gone up by 50%. However, according to Commsec, the Pro Medicus share price is valued at 109 times FY23's estimated earnings.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara predominately aims to help save families from breast cancer, with "advanced cancer screening science and protocols". It's focused on detection and increasing prevention for women while digitising and reducing waste for medical professionals.

The company said in its FY22 half-year result that approximately 40.5% of screened women in the US have had contact with at least one Volpara product in obtaining their images and data. In HY22, operating expenses only increased by 3.4%, while revenue grew by 37%.

The ASX healthcare share is aiming to grow its average revenue per user (ARPU) to have more Volpara products used on patient images. The company is also looking to reach operating cash flow breakeven by the fourth quarter of FY24.

After a 41% fall of the Volpara share price in 2022, it's now at a much cheaper level than it was in 2021 despite its ongoing revenue growth. The business is also working on growing its presence in lung cancer screening.

Sonic Healthcare Ltd (ASX: SHL)

Sonic Healthcare is a leading pathology and radiology business on the ASX. The advancement of technology is enabling the company to provide a more detailed pathology service for patients and medical practitioners.

Its base revenue continues to grow. Geographic expansion, as well as wider service offers, can be a tailwind for the ASX healthcare share.

One of the intriguing elements of Sonic's business is the 20% investment in artificial intelligence (AI) business Harrison.ai, which has an existing radiology AI product called Annalise.ai. This is a market leader in radiology AI, according to Sonic. A brain CT scan product has also been completed, with tools for other modalities to follow.

Franklin.ai is a joint venture between Sonic and Harrison.ai to develop 'best-in-class' diagnostic tools for pathology. It's targeting a first product release within two years.

The Sonic Healthcare share price is down over 30% in 2022 to date. According to Commsec, this puts the business at 19 times FY23's estimated earnings.

The post Why I'd invest in these 3 ASX shares to combat this one inflationary megatrend appeared first on The Motley Fool Australia.

When it comes to analysing ASX shares, there are countless fundamental factors and characteristics to look at.

Last week, I zeroed in on management, profiling some ASX 200 shares with founders steering the ship and others with enormous insider ownership.

Today, it's all about gross profit margins. 

Put simply, gross profit is the money that a company has left after paying for the stuff it sold. 

These selling costs are typically listed as 'cost of sales' or 'cost of goods sold'. You'd find this towards the top of a company's income statement. 

But in some cases, companies bypass this line item altogether and don't break out cost of sales from the rest of their operating expenses.

The gross profit margin simply represents gross profit as a proportion of revenue. The higher, the better, because it means the company is holding onto a greater portion of every sales dollar.

With that in mind, let's take a look at five ASX 200 shares with deliciously-high gross margins.

Pro Medicus Limited (ASX: PME)

Topping this list is ASX 200 healthcare share Pro Medicus, a global leader in radiology imaging software. 

In FY22, Pro Medicus generated $93.5 million in revenue against cost of sales of just $465,000. This translates to a staggeringly-high gross margin of 99.5%.

Crucially, Pro Medicus is a software-only business, so there are minimal costs involved in rolling out new contracts. The outcome is an incredibly capital-light, scalable business.

But while there are varying interpretations of what goes into cost of sales from company to company, Pro Medicus backs this up with extremely wide profit margins.

In fact, Pro Medicus turns two-thirds of every sales dollar into profit before tax. These margins have only been heading higher over time, demonstrating tremendous operating leverage.

Carsales.com Ltd (ASX: CAR)

Next up is the ASX 200 tech share behind Australia's leading automotive classifieds business.

In FY22, Carsales incurred cost of sales of $50 million on the way to generating revenue of $509 million. This spins up a stunning gross margin of 90%.

Carsales operates an extensive network of classifieds websites, covering everything from motorbikes and boats to caravans, trucks, construction equipment, and tyres.

In a similar vein to REA Group Limited (ASX: REA), it also lays claim to a range of different automotive classified portals around the world through a mix of full and partial ownership stakes.

Importantly, Carsales' juicy gross margin isn't lost further down the income statement. It boasts an earnings margin of 53%, achieving earnings before interest, tax, depreciation, and amortisation (EBITDA) of $270 million in FY22.

Xero Limited (ASX: XRO)

I'm sure it's no surprise to see Xero on this list, a software-as-a-service (SaaS) business leading the shift to cloud accounting.

As a Kiwi company, Xero handed in its first-half FY23 results last month. Across this period, the ASX 200 tech share drummed up revenue of NZ$658.5 million while cost of revenue came in at NZ$85.6 million.

So, all up, Xero held its gross margin steady over the prior year at an impressive 87%.

Unlike Pro Medicus and Carsales, Xero makes it easy for investors by specifying what goes into cost of revenue.

As detailed in its interim report, Xero's cost of revenue comprises expenses directly associated with hosting its services, sourcing relevant data from financial institutions, and providing support to subscribers.

Breaking this down even further, the company noted that this includes hosting costs, bank feed costs, employee-related expenses directly associated with cloud infrastructure and subscriber support, and related depreciation and amortisation.

Despite its strong gross margins, Xero continues to operate at a loss. This is because the ASX 200 tech share is prioritising future growth, ploughing droves of money into product development and marketing efforts at attractive rates of return.

WiseTech Global Ltd (ASX: WTC)

Continuing the tech theme, WiseTech is another ASX 200 share with terrific margins.

In FY22, WiseTech posted revenue of $632.2 million against cost of revenues of $92.5 million. This spits out an eye-catching gross margin of 85%, up from 83% in the prior year.

The ASX 200 tech share attributed this margin expansion to the impact of revenue growth and continuing efficiencies from its cost reduction initiatives.

WiseTech notes that its cost of revenues consists of expenses directly associated with hosting its services and providing support to customers.

Similarly to Xero, this includes data centre costs, employee-related expenses directly associated with cloud infrastructure and customer support, contracted third-party costs, and related depreciation and amortisation. 

WiseTech is another ASX 200 share boasting a strong duo of gross margins and earnings margins. In FY22, the logistics software provider delivered an EBITDA margin of 50%.

Lovisa Holdings Ltd (ASX: LOV)

The common thread from the four ASX 200 shares I've profiled so far is that they're all software-only businesses.

So while its gross margin isn't quite as high as the others on this list, I wanted to give a nod to an ASX 200 share with enviable margins for a retailer.

Retailing is traditionally known as a low-margin business. But as I've covered previously, Lovisa flips the script with its vertically-integrated business model and low-cost products.

Surveying the ASX retail landscape, Accent Group Ltd (ASX: AX1) has gross margins of 55%, Temple & Webster Group Ltd (ASX: TPW) has gross margins of 45%, and JB Hi-Fi Limited (ASX: JBH) has gross margins of 23%, to pick out just a few.

But one of the things that set Lovisa apart is that all of the products it sells are designed and manufactured in-house. In contrast, many ASX retailers sell a mix of own-brand and third-party products.

This boosts Lovisa's gross margins, which came in at a whopping 79% in FY22. Put another way, for every pair of $10 earrings flying off the shelves, it paid suppliers on average just $2.10.

The ASX 200 retailer's small-store footprint also bodes well for earnings margins, with Lovisa achieving an EBITDA margin of 31% in FY22.

The post 5 ASX 200 shares with juicy gross profit margins appeared first on The Motley Fool Australia.