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Bright Near-Term Outlook for Medical Info Systems Industry
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The Zacks Medical Info Systems industry comprises developers and marketers of healthcare information systems. These companies offer software and hardware solutions that enable healthcare providers to securely access clinical, administrative and financial data in a time-efficient manner.
These companies primarily derive revenues from the sale of proprietary software and related hardware, professional services and IT outsourcing services. The recurring service contracts for software maintenance and certain transaction processing services drive revenues for these companies.
Digital transition is accelerating demand for IT service solutions in healthcare. Robust adoption of technologies is easing management of billing, quality measurement and reporting, clinical documentation and data exchange, post-discharge patient monitoring, patient communication and referrals, and many other related tasks. Also, the implications of AI, cloud-based technologies and increased R&D focus have lent a competitive edge to companies within the MedTech space.
Here are the three major themes in the industry:
Electronic health records (EHRs), electronic medical records, predictive analytics and real-time alerting have been gaining prominence in the U.S. MedTech space. Escalating administrative costs to manage and hold records of healthcare providers justify the fast adoption of these technologies. In fact, in April 2018, 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.
Hospitals, clinics and other medical facilities have been seeing rising threats of late owing to payment reforms put forth by the Centers for Medicare & Medicaid Services and commercial health payers. However, an analytics-based approach using big data and machine learning has been improving productivity in the healthcare revenue cycle. In this regard, the Revenue Cycle Management (“RCM”) solution is gaining popularity. NextGen Healthcare, Inc. has scored the highest among all ambulatory vendors for its performance in some key RCM areas. Meanwhile, augmented reality (AR) tools are emerging as revolutionary techniques in the fields of minimally-invasive surgeries, diagnostics and educational training related to medical sciences.
There is also a growing need for healthcare organizations to have instant and complete access to a patient’s medical records to avoid medical errors which are considered to be a leading cause of death in the United States. In this regard, U.K.-based publisher of medical journals and clinical research, BMJ, stated in a 2016 podcast that around 250,000 deaths every year in the United States are caused by medical errors (per an article on Crypto Currency News). Also, healthcare organizations are increasingly required to prevent data hacking and phishing for maintaining confidentiality of patient’s health information.
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 #91, which places it in the top 36% 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 S&P 500 and Sector
The industry has outperformed the Zacks S&P 500 composite and its own sector in the past year.
Stocks in this industry have collectively gained 16% against the Zacks Medical sector’s decline of 8.8% and the S&P 500’s increase of 15.4%.
One Year Price Performance
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 30.74X compared with the S&P 500’s 17.18X and the sector’s 14.24X.
Over the last five years, the industry has traded as high as 40.80X, as low as 29.69X, and at the median of 33.15, as the charts below show.
Price-to-Earnings Forward 12 Months (F12M)
Price-to-Earnings Forward 12 Months (F12M)
Bottom Line
Rising technology dominance will continue to drivedemand for IT service solutions in healthcare. Moreover, with increasing competition and rising healthcare costs, it will become absolutely necessary for healthcare organizations to control administrative costs. Also, healthcare organizations are increasingly required to prevent data hacking and phishing for maintaining confidentiality of patient’s health information. All these factors are expected to work in favor of most companies in the Zacks medical info systems universe.
Medidata Solutions, Inc. : Based in NY, Medidata Solutions is a global life sciences technology provider, dedicated to improving the way clinical research is designed, conducted and analyzed. The company’s cloud-based platform of solutions and data analytics enables efficiency and quality throughout clinical development programs. The company recently announced the launch of an AI company — Acorn AI. The launch reflects the company’s efforts toward speeding up digital transformation in life sciences across its platform. More specifically, it is an attempt to personalize and optimize clinical trials.
The stock has gained 8.8% in a year’s time. The medical info systems player has an estimated long-term earnings growth rate of 18.4%. The company has surpassed estimates in the last four quarters, the positive earnings surprise being 16.4%.
Price and Consensus: MDSO
Syneos Health, Inc. : Headquartered in Morrisville, NC, Syneos Health is a leading global biopharmaceutical solutions company offering a complete range of clinical and commercial facilities. The company majorly provides these services to customers in the biopharmaceutical, biotechnology, and medical device industries. Through its Contract Research Organization and Contract Commercial Organization, Syneos Health provides integrated and self-contained biopharmaceutical product development solutions varying from Early Phase (Phase I) clinical trials to the complete commercialization of biopharmaceutical products.
The stock has a Zacks Rank #3 and has gained 19.7% in a year’s time. The medical info systems player has an estimated long-term earnings growth rate of 13%. The company has surpassed estimates in the last four quarters, the positive earnings surprise being 8.7%.
Price and Consensus: SYNH
HMS Holdings Corp. : Based in Irving, TX, HMS Holdings offers cost-containment solutions in the United States. The company provides Coordination of Benefits services to government and commercial healthcare payers. The company's services enable customers to recover due payments, reduce fraud, waste and misuse, improve outcomes, and increase retention apart from ensuring regulatory compliance.
The stock has a Zacks Rank #3 and has gained 56.4% in a year’s time. The medical info systems player has an estimated long-term earnings growth rate of 11%. The company has surpassed estimates in the last four quarters, the positive earnings surprise being 37.5%.
Price and Consensus: HMSY
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Bright Near-Term Outlook for Medical Info Systems Industry
The Zacks Medical Info Systems industry comprises developers and marketers of healthcare information systems. These companies offer software and hardware solutions that enable healthcare providers to securely access clinical, administrative and financial data in a time-efficient manner.
These companies primarily derive revenues from the sale of proprietary software and related hardware, professional services and IT outsourcing services. The recurring service contracts for software maintenance and certain transaction processing services drive revenues for these companies.
Digital transition is accelerating demand for IT service solutions in healthcare. Robust adoption of technologies is easing management of billing, quality measurement and reporting, clinical documentation and data exchange, post-discharge patient monitoring, patient communication and referrals, and many other related tasks. Also, the implications of AI, cloud-based technologies and increased R&D focus have lent a competitive edge to companies within the MedTech space.
Here are 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 #91, which places it in the top 36% 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 S&P 500 and Sector
The industry has outperformed the Zacks S&P 500 composite and its own sector in the past year.
Stocks in this industry have collectively gained 16% against the Zacks Medical sector’s decline of 8.8% and the S&P 500’s increase of 15.4%.
One Year Price Performance
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 30.74X compared with the S&P 500’s 17.18X and the sector’s 14.24X.
Over the last five years, the industry has traded as high as 40.80X, as low as 29.69X, and at the median of 33.15, as the charts below show.
Price-to-Earnings Forward 12 Months (F12M)
Price-to-Earnings Forward 12 Months (F12M)
Bottom Line
Rising technology dominance will continue to drivedemand for IT service solutions in healthcare. Moreover, with increasing competition and rising healthcare costs, it will become absolutely necessary for healthcare organizations to control administrative costs. Also, healthcare organizations are increasingly required to prevent data hacking and phishing for maintaining confidentiality of patient’s health information. All these factors are expected to work in favor of most companies in the Zacks medical info systems universe.
Here we pick three stocks from the Medical Info Systems industry with a Zacks Rank #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.
Medidata Solutions, Inc. : Based in NY, Medidata Solutions is a global life sciences technology provider, dedicated to improving the way clinical research is designed, conducted and analyzed. The company’s cloud-based platform of solutions and data analytics enables efficiency and quality throughout clinical development programs. The company recently announced the launch of an AI company — Acorn AI. The launch reflects the company’s efforts toward speeding up digital transformation in life sciences across its platform. More specifically, it is an attempt to personalize and optimize clinical trials.
The stock has gained 8.8% in a year’s time. The medical info systems player has an estimated long-term earnings growth rate of 18.4%. The company has surpassed estimates in the last four quarters, the positive earnings surprise being 16.4%.
Price and Consensus: MDSO
Syneos Health, Inc. : Headquartered in Morrisville, NC, Syneos Health is a leading global biopharmaceutical solutions company offering a complete range of clinical and commercial facilities. The company majorly provides these services to customers in the biopharmaceutical, biotechnology, and medical device industries. Through its Contract Research Organization and Contract Commercial Organization, Syneos Health provides integrated and self-contained biopharmaceutical product development solutions varying from Early Phase (Phase I) clinical trials to the complete commercialization of biopharmaceutical products.
The stock has a Zacks Rank #3 and has gained 19.7% in a year’s time. The medical info systems player has an estimated long-term earnings growth rate of 13%. The company has surpassed estimates in the last four quarters, the positive earnings surprise being 8.7%.
Price and Consensus: SYNH
HMS Holdings Corp. : Based in Irving, TX, HMS Holdings offers cost-containment solutions in the United States. The company provides Coordination of Benefits services to government and commercial healthcare payers. The company's services enable customers to recover due payments, reduce fraud, waste and misuse, improve outcomes, and increase retention apart from ensuring regulatory compliance.
The stock has a Zacks Rank #3 and has gained 56.4% in a year’s time. The medical info systems player has an estimated long-term earnings growth rate of 11%. The company has surpassed estimates in the last four quarters, the positive earnings surprise being 37.5%.
Price and Consensus: HMSY
Is Your Investment Advisor Fumbling Your Financial Future?
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