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athenahealth Fights Competition with Saas-Based Approach


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On Sep 28, we issued an updated research report on athenahealth Inc. (ATHN - Analyst Report) . The company currently carries a Zacks Rank #3 (Hold).

We believe that an impressive product portfolio and a growing physician base continue to serve as the key positives for the company. On the other hand, lack of enterprise-sized deals, winding up of government-funded stimulus and increasing competition pose as major headwinds.

The unique business model of athenahealth makes it a strong provider of Revenue Cycle Management (RCM) services to small physician practices. The Software as a Service (SaaS) based approach allows for a lower-cost and more flexible delivery mechanism that is expected to help athenahealth win deals.

In our opinion, athenahealth will continue to benefit from its extensive athenaCollector client base. Its EHR product is a key player in the ambulatory billing market. The company’s updated knowledge base gives its customers real time information that no other competitor has exactly replicated. In addition, the Epocrates acquisition is likely to enhance athenahealth’s user network.

On the macro level, the HITECH Act, which has authorized the EHR Incentive program or the Meaningful Use program, presents significant opportunities for EHR vendors like athenahealth.

However, as the government-sponsored EHR program winds down over the next few years, it will pose a significant problem for athenahealth. The company also lacks adequate alignment with hospitals, which prevents it from getting enterprise-sized deals.

We feel athenahealth’s long-term goal of 30% top-line growth is challenging, given the consolidation trend among small physician practices.

Stocks to Consider

Some better-ranked stocks in the broader medical sector are CryoLife Inc. (CRY - Snapshot Report) , IDEXX Laboratories Inc. (IDXX - Analyst Report) and Masimo Corporation (MASI - Analyst Report) . All these stocks sport a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here. You can see the complete list of today’s Zacks #1 Rank stocks here.

CryoLife recorded an impressive year-to-date return of 65.4%, better than the S&P 500’s 6.2% over the same time frame. In fact, the company posted positive earnings surprises in the last four quarters, the average being 502.50%.

IDEXX represents a strong year-to-date return of 55.5%. The company also recorded a streak of positive earnings surprises over the last four quarters, the average being 12.7%.

Masimo has an impressive long-term expected earnings growth rate of 15% and a solid year-to-date return of 44.1%.

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