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Bright Near-Term Outlook for Medical Info Systems Industry
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The Zacks Medical Info Systems industry comprises companies which develop and market healthcare information systems. Notably, these companies offer software and hardware solutions to healthcare providers with secure access to real-time clinical, administrative and financial data in a time efficient manner.
Such companies rake 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.
Escalating administrative costs, and the need for instant and complete access to a patient’s medical records to avoid errors have amplified the need for big data (the cloud-based electronic health records [“EHR”] model being the most popular), 3D printing, blockchain and Artificial Intelligence (“AI”). Notably, these trends are currently shaping the MedTech space.
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. 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.
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 to 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.
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 #108, which places it in the top 42% 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 lagged the Zacks S&P 500 composite over the past year.
Stocks in this industry have slipped 12.6%, comparing favorably with the Zacks Medical sector’s decline of 24.6% and the S&P 500’s fall of 3%.
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 45.52X compared with the S&P 500’s 16.35X and the sector’s 14.03X.
Over the last five years, the industry has traded as high as 46.47X, as low as 25.64X, and at the median of 33.69.
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 control administrative costs. Also, these organizations are increasingly required to implement cybersecurity rules for maintaining confidentiality of patient’s health information. Additionally, Revenue Cycle Management (“RCM”) solutions are gaining prominence as well. For instance, NextGen Healthcare scores the highest among all ambulatory vendors for its performance in some key RCM areas.
All these factors are expected to work in favor of most companies in the Zacks medical info systems universe.
Cerner Corporation : Headquartered in North Kansas City, MO, 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. Cerner’s big-data based EHR systems — HealtheIntent and Millennium — deserve a mention in this regard. Notably, Cerner's HealtheIntent is a big data platform, which provides the company 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 medical info systems player has an estimated long-term earnings growth rate of 14.4%. The company has surpassed estimates in the last four quarters, the average earnings surprise being a positive 0.8%.
Price and Consensus: CERN
Allscripts Healthcare Solutions, Inc. (MDRX - Free Report) : Illinois-based Allscripts Healthcare provides IT solutions and services to healthcare organizations. Allscripts 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 important 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 10.3%. The company has a positive average earnings surprise of 2.6%.
Price and Consensus: MDRX
Omnicell, Inc. (OMCL - Free Report) : Headquartered in Mountain View, CA, Omnicell develops and markets end-to-end automation solutions. These solutions contain medication and supply dispensing systems, central pharmacy storage, retrieval and packaging solutions. Notably, the company’s G4 platform, analytics tools and medication adherence solutions have seen strong adoption in recent times. The company’s automation tools like the XR2 Central Pharmacy Robot and the IV technology help bring down medication dispensing and compounding costs.
Omnicell has an estimated long-term earnings growth rate of 15%. The company has a positive average earnings surprise of 17.6%.
Price and Consensus: OMCL
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Bright Near-Term Outlook for Medical Info Systems Industry
The Zacks Medical Info Systems industry comprises companies which develop and market healthcare information systems. Notably, these companies offer software and hardware solutions to healthcare providers with secure access to real-time clinical, administrative and financial data in a time efficient manner.
Such companies rake 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.
Escalating administrative costs, and the need for instant and complete access to a patient’s medical records to avoid errors have amplified the need for big data (the cloud-based electronic health records [“EHR”] model being the most popular), 3D printing, blockchain and Artificial Intelligence (“AI”). Notably, these trends are currently shaping the MedTech space.
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 #108, which places it in the top 42% 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 lagged the Zacks S&P 500 composite over the past year.
Stocks in this industry have slipped 12.6%, comparing favorably with the Zacks Medical sector’s decline of 24.6% and the S&P 500’s fall of 3%.
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 45.52X compared with the S&P 500’s 16.35X and the sector’s 14.03X.
Over the last five years, the industry has traded as high as 46.47X, as low as 25.64X, and at the median of 33.69.
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 control administrative costs. Also, these organizations are increasingly required to implement cybersecurity rules for maintaining confidentiality of patient’s health information. Additionally, Revenue Cycle Management (“RCM”) solutions are gaining prominence as well. For instance, NextGen Healthcare scores the highest among all ambulatory vendors for its performance in some key RCM areas.
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.
Cerner Corporation : Headquartered in North Kansas City, MO, 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. Cerner’s big-data based EHR systems — HealtheIntent and Millennium — deserve a mention in this regard. Notably, Cerner's HealtheIntent is a big data platform, which provides the company 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 medical info systems player has an estimated long-term earnings growth rate of 14.4%. The company has surpassed estimates in the last four quarters, the average earnings surprise being a positive 0.8%.
Price and Consensus: CERN
Allscripts Healthcare Solutions, Inc. (MDRX - Free Report) : Illinois-based Allscripts Healthcare provides IT solutions and services to healthcare organizations. Allscripts 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 important 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 10.3%. The company has a positive average earnings surprise of 2.6%.
Price and Consensus: MDRX
Omnicell, Inc. (OMCL - Free Report) : Headquartered in Mountain View, CA, Omnicell develops and markets end-to-end automation solutions. These solutions contain medication and supply dispensing systems, central pharmacy storage, retrieval and packaging solutions. Notably, the company’s G4 platform, analytics tools and medication adherence solutions have seen strong adoption in recent times. The company’s automation tools like the XR2 Central Pharmacy Robot and the IV technology help bring down medication dispensing and compounding costs.
Omnicell has an estimated long-term earnings growth rate of 15%. The company has a positive average earnings surprise of 17.6%.
Price and Consensus: OMCL
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>