Profit from the Disappearance of those Medical Records - Quality Systems
Wednesday, September 26th, 2007First before we get into the stock pitch, I wanted to apologize for the long layoff. I’ve been working on a web project that has yet to launch because of the numerous delays that stop me from seeing my baby take it’s first steps. I also wanted to say that I’m going to try to update a little more often because I love stocks and trading so I’ll probably never tear myself away from it. Also since summarizing Mad Money and Fast Money takes so long, I’m not going to do that and just go back to the basic point of this site which is to provide good analysis and some good stock picks…I mean PITCHES!
Quality Systems (QSII) is a company that I almost went into business against a few years back but fortunately, I was smart enough not to battle the numerous companies doing EMR or electronic medical records software. Our society is very very advanced but our medical system is a freaking dinosaur. Have you seen your doctors back offices? Yes file folders. What are we doing in our medical industry that we can’t get approvals from a computer system and automatically tell a system that we are allergic without the nurse asking fifty gazillion times. Ok sorry about that but seriously we all know that there has to be change. The advantage of medical software far outweigh the flaws.
Benefit number one is better and more accurate records which can turn to more accurate diagnosis. Two, cost savings in time spend on record management. Three, less change of human error in providing care and treatment. Four, ability to share medical information with other doctors so all issues are known so related information is taken into consideration while the doctor is making a decision. Five, we save some darn trees. The list can go on and on mainly because I did a business plan on this industry but the benefits are undeniable. So undeniable that Congress is in the progress of enacting legislation to force this software onto the medical system. Yes making good record keeping the law. How novel?
There are a few companies that will benefit. There is Cerner (CERN), General Electric (GE), Allscripts Healthcare Solutions Inc. (MDRX), and a tons more. While Cerner and General Electric are much too big to focus on this industry, the two companies that will benefit looks like will be Allscripts and Quality Systems who exclusively develop the software. Both companies were mentioned by Pete Najarian on CNBC’s Fast Money and both companies have a strong foothold although Allscripts is much bigger with a market cap of 1.4B, PE of 85, and revenue of 260M. Quality System is a much better value it seems from the fundmental stand point where it stands slightly below 1B market cap but with 29 PE and a forward PE of only about 20. The price per earnings growth (PEG) is a measly 0.96 with a clean balance sheet of NO DEBT and 70M in cash. The growth rate for both companies is about 16% but with Congress intervention, these stocks will move like crazy especially Quality System that has been beaten down with a 25% short position - any move up will be magnified.
The chart doesn’t look great but you can see that there is a turning point technically as you see there is move in the MACD to the upside on strong volume and the money is starting to flow back. Today it had a good move on strong volume but expect a huge move when there is more news of legislation. You hear it here - Quality Systems.
