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Bright Near-Term Outlook for Medical Info Systems Industry
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Healthcare information technology is constantly evolving to meet the changing needs of healthcare providers. Notably, companies which develop and market healthcare information systems form the Medical Info Systems industry. They offer software and hardware solutions to healthcare providers with secure access to real-time clinical, administrative and financial data in a time efficient manner.
Stronger focus on patient satisfaction to greater security of patient data, escalating administrative costs have amplified the need for big data (the cloud-based electronic health records [“EHR”] model being the most popular), 3D printing, blockchain and AI. These trends are currently shaping the MedTech space.
These companies are raking in billions from the sale of proprietary software and related hardware, professional services and IT outsourcing services. Recurring service contracts for software maintenance and certain transaction processing services also contribute to revenues.
In view of this, let’s take a look at the three major themes in the industry:
EHRs, electronic medical records (“EMR”), predictive analytics and real-time alerting have been gaining prominence in the U.S. MedTech space. This has collectively led to the emergence of Internet of Medical Things (IoMT). This has enabled the use of a number of wearables, including ECG and EKG monitors, apart from other common medical measurements like skin temperature, glucose level, and blood pressure readings. Evolution in telemedicine is another mega trend worth mentioning here. Notably, telemedicine is proving to be increasingly transformative as it makes it easier for patients to gain access to specialists.
Another new trend is the blockchain technology, a new method of storing the same amount of digital information in such a way that it takes up less space. Notably, blockchain systems help EMRs connect and share information without limitations. This keeps patient records more secure, while simultaneously making it easier for providers to share information on patient care. In fact, leading health care companies like Humana (HUM - Free Report) , MultiPlan, Quest Diagnostics (DGX - Free Report) and UnitedHealth Group’s (UNH - Free Report) Optum and UnitedHealthcare formed an alliance to launch Synaptic Health Alliance pilot project on the blockchain technology. Aetna, a CVS Health business, and Ascension have also joined this program.
As healthcare becomes more wired and interconnected, cybersecurity becomes a primary concern for hospitals. Notably, healthcare facilities have been the target of many high-profile attacks by hackers that have cost millions and caused major disruption in patient care systems. In fact, security flaws are often found in electronic medical device operating systems or other devices like ECG machines, imaging scanners, infusion pumps and telemetry systems.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Medical Info Systems industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #92, which places it in the top 37% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
We will present a few stocks that have the potential to outperform the market based on a strong earnings outlook. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Outperforms Sector, Lags S&P 500
The industry has outperformed its own sector but has lagged the Zacks S&P 500 composite over the past year.
Stocks in this industry have rallied 23.3%, comparing favorably with the Zacks Medical sector’s rise of 8.3%. Meanwhile, the S&P 500 has rallied 28.5%.
Industry’s Current Valuation
On the basis of the forward 12-month Price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry is currently trading at 50.99X compared with the S&P 500’s 18.79X and the sector’s 21.44X.
Over the last five years, the industry has traded as high as 51.67X, as low as 24.52X, and at the median of 32.16.
Price-to-Earnings Forward 12 Months (F12M)
Price-to-Earnings Forward 12 Months (F12M)
Bottom Line A growing technology revolution will continue to drive demand for IT service solutions in healthcare. Moreover, with increasing competition and rising healthcare costs, it will become absolutely necessary for healthcare organizations to implement IoMT, telemedicine and blockchain technology. Also, these organizations are increasingly required to implement cybersecurity rules for maintaining confidentiality of patients’ health information. Additionally, the arrival of VR and AR solutions has led to significant advances in healthcare technologies. From educating new students to planning procedures, the field of AR and VR in healthcare offers considerable promise.
These factors are expected to work in favor of most companies in the Zacks medical info systems universe.
Cerner Corporation : Missouri-based Cerner provides healthcare information technology (“HCIT”) solutions worldwide. The company offers software and hardware solutions that give healthcare providers secure access to clinical, administrative and financial data with ease. The company’s big-data based EHR systems — HealtheIntent and Millennium — deserve a mention in this regard. Notably, HealtheIntent is a big data platform, which provides Cerner with significant exposure to AI trends in the medical world. Cerner Millennium is an HCIT platform designed to support an individual’s care across the continuum — from the doctor’s office to the hospital and other venues of care.
The Zacks Rank #2 company has an estimated long-term earnings growth rate of 13.6%. The company has surpassed earnings estimates in the last four quarters, the positive surprise being 1.2%, on average.
Allscripts Healthcare Solutions, Inc. (MDRX - Free Report) : Illinois-based Allscripts Healthcare provides IT solutions and services to healthcare organizations. The company primarily derives revenues from the sale of its proprietary software and related hardware, professional services and IT outsourcing services. Notably, its coveted EHR platforms like Sunrise and Paragon have been key growth drivers. Allscripts Sunrise is a fully-integrated EHR platform that connects all clinical and financial aspects of a hospital or health system for inpatient, emergency and outpatient care. Meanwhile, Paragon is an integrated EHR and financial/administrative solution for smaller hospitals.
The company has an estimated long-term earnings growth rate of 10.5%. The company has a positive average earnings surprise of 5.5% for the trailing four quarters.
Change Healthcare, Inc. : Headquartered in Nashville, TN, Change Healthcare is an independent healthcare technology platform offering data and analytics-driven solutions to boost clinical financial and patient engagement outcomes in the United States healthcare system. The company operates through three major segments — Software and Analytics, Network Solutions and Technology-Enabled Services. Overall, Change Healthcare offers software and analytics solutions for financial performance, enables financial, administrative, and clinical transactions and provides solutions for financial and administrative management and value-based care.
The company has an estimated long-term earnings growth rate of 7%. The company has a positive average earnings surprise of 23.7% for the trailing four quarters.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Bigstock
Bright Near-Term Outlook for Medical Info Systems Industry
Healthcare information technology is constantly evolving to meet the changing needs of healthcare providers. Notably, companies which develop and market healthcare information systems form the Medical Info Systems industry. They offer software and hardware solutions to healthcare providers with secure access to real-time clinical, administrative and financial data in a time efficient manner.
Stronger focus on patient satisfaction to greater security of patient data, escalating administrative costs have amplified the need for big data (the cloud-based electronic health records [“EHR”] model being the most popular), 3D printing, blockchain and AI. These trends are currently shaping the MedTech space.
These companies are raking in billions from the sale of proprietary software and related hardware, professional services and IT outsourcing services. Recurring service contracts for software maintenance and certain transaction processing services also contribute to revenues.
In view of this, let’s take a look at the three major themes in the industry:
Zacks Industry Rank Indicates Bright Prospects
The Zacks Medical Info Systems industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #92, which places it in the top 37% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
We will present a few stocks that have the potential to outperform the market based on a strong earnings outlook. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Outperforms Sector, Lags S&P 500
The industry has outperformed its own sector but has lagged the Zacks S&P 500 composite over the past year.
Stocks in this industry have rallied 23.3%, comparing favorably with the Zacks Medical sector’s rise of 8.3%. Meanwhile, the S&P 500 has rallied 28.5%.
Industry’s Current Valuation
On the basis of the forward 12-month Price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry is currently trading at 50.99X compared with the S&P 500’s 18.79X and the sector’s 21.44X.
Over the last five years, the industry has traded as high as 51.67X, as low as 24.52X, and at the median of 32.16.
Price-to-Earnings Forward 12 Months (F12M)
Price-to-Earnings Forward 12 Months (F12M)
Bottom Line
A growing technology revolution will continue to drive demand for IT service solutions in healthcare. Moreover, with increasing competition and rising healthcare costs, it will become absolutely necessary for healthcare organizations to implement IoMT, telemedicine and blockchain technology. Also, these organizations are increasingly required to implement cybersecurity rules for maintaining confidentiality of patients’ health information. Additionally, the arrival of VR and AR solutions has led to significant advances in healthcare technologies. From educating new students to planning procedures, the field of AR and VR in healthcare offers considerable promise.
These factors are expected to work in favor of most companies in the Zacks medical info systems universe.
Here we mention three stocks from the Medical Info Systems industry with a Zacks Rank #2 (Buy) or 3 (Hold) and a positive long-term earnings growth rate. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cerner Corporation : Missouri-based Cerner provides healthcare information technology (“HCIT”) solutions worldwide. The company offers software and hardware solutions that give healthcare providers secure access to clinical, administrative and financial data with ease. The company’s big-data based EHR systems — HealtheIntent and Millennium — deserve a mention in this regard. Notably, HealtheIntent is a big data platform, which provides Cerner with significant exposure to AI trends in the medical world. Cerner Millennium is an HCIT platform designed to support an individual’s care across the continuum — from the doctor’s office to the hospital and other venues of care.
The Zacks Rank #2 company has an estimated long-term earnings growth rate of 13.6%. The company has surpassed earnings estimates in the last four quarters, the positive surprise being 1.2%, on average.
Allscripts Healthcare Solutions, Inc. (MDRX - Free Report) : Illinois-based Allscripts Healthcare provides IT solutions and services to healthcare organizations. The company primarily derives revenues from the sale of its proprietary software and related hardware, professional services and IT outsourcing services. Notably, its coveted EHR platforms like Sunrise and Paragon have been key growth drivers. Allscripts Sunrise is a fully-integrated EHR platform that connects all clinical and financial aspects of a hospital or health system for inpatient, emergency and outpatient care. Meanwhile, Paragon is an integrated EHR and financial/administrative solution for smaller hospitals.
The company has an estimated long-term earnings growth rate of 10.5%. The company has a positive average earnings surprise of 5.5% for the trailing four quarters.
Change Healthcare, Inc. : Headquartered in Nashville, TN, Change Healthcare is an independent healthcare technology platform offering data and analytics-driven solutions to boost clinical financial and patient engagement outcomes in the United States healthcare system. The company operates through three major segments — Software and Analytics, Network Solutions and Technology-Enabled Services. Overall, Change Healthcare offers software and analytics solutions for financial performance, enables financial, administrative, and clinical transactions and provides solutions for financial and administrative management and value-based care.
The company has an estimated long-term earnings growth rate of 7%. The company has a positive average earnings surprise of 23.7% for the trailing four quarters.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>