Tuesday September 06, 2011
by Mike Cintolo, editor Cabot Top Ten Trader
Three of the stock that appear in our latest Top Ten report focus on electronic medical records.
The power behind the push toward electronic modernization in both billing and patient records, is signiﬁcant. Here's a look at Athenahealth (ATHN), Cerner (CERN) and Quality Systems (QSII).
Cerner develops software to manage medical records for over 9,000 healthcare providers of different types around the globe.
In a paperwork-heavy industry such as healthcare, companies like Cerner were already well-positioned to take advantage of the desire to become more automated.
Healthcare reform gave the move to automation an added boost by basing payments on healthcare results, which presumes a better data trail is needed.
The company’s annual $1.85 billion in sales are fairly evenly divided between its various business sectors. For this year, the company projects sales will grow to $2.12 billion and $1.80-$1.83 per share net income.
CERN cut a steady chart to an all-time high of 67 on July 29 before falling below their 50-day moving average during the early August market turmoil.
Bargain hunting recently powered shares higher on excellent volume; expect resistance, with any dips to 61 presenting a nice buying opportunity.
Athenahealth is a Massachusetts-based company that specializes in helping doctors and hospitals manage their billing and collections process, reducing administrative overhead and increasing revenues.
The company just announced that it has signed a contract with the Maine Medical Center Physician-Hospital Organization that represents more than 1,000 physician members.
Contracts like this one are the meat and potatoes of Athenahealth’s business, as once a group signs on, the positive results usually cause them to stick with the program.
Sales growth has topped 30% for the last four years, and a Q2 earnings report featuring 83% earnings growth on a 33% gain in revenue shows consistent strength.
The stock's long base at 46 made it clear that institutions were actively acquiring the stock, and when a good earnings report hit on July 22, ATHN ripped from 48 to 57 in a day.
Since then, the stock has been resilient, ﬁnding support at the 50-day moving average and soaring to challenge its old high at 60. Try to buy on weakness.
Quality Systems started out in the dental ﬁeld and has helped that segment of the healthcare industry to be more digitized than other segments.
Management expects to do the same for other medical records, noting that only 20% of physicians both have electronic health records and use them correctly.
Further, the Affordable Care Act is providing $11 billion to Federally Qualiﬁed Healthcare Facilities to upgrade their records management.
Quality Systems still has a good opportunity to grow— 2010 revenues were just $292 million, representing a 25% compounded annual growth rate since 2006.
The company also pays a dividend, which is indicated to come in at $1.40 for the current year.
Technically, the stock's old high of 92 could prove tough to chew through, so if you’re game, try to buy on weakness.
Learn more about this financial newsletter at Mike Cintolo's Cabot Top Ten Trader.