Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Cerner Shares Soared

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of health-care information technology company Cerner (Nasdaq: CERN  ) jumped as much as 17% on Friday after reporting better-than-expected third-quarter earnings results.

So what: For the quarter, Cerner reported an 18% rise in revenue to $676.3 million and a 25% advance in profits to an adjusted EPS of $0.60, which is slightly higher than Wall Street's expectations on both accounts. Cerner's fourth-quarter outlook also fell perfectly within the Street's consensus figures. The real share-moving news has to do with expectations that it'll pick up an additional $925 million to $975 million in new business in the fourth quarter.

Now what: On paper, Cerner's business model makes a lot of sense. The company makes software and a cloud-based platform that handles electronic health records, revenue management cycles, and support service for the health-care industry. New laws essentially require the digitization of medical records, and the Affordable Care Act should bring medical care within reach for millions of new Americans in 2014.

However, putting all of that aside, I'm having a hard time looking past Cerner's premium valuation. After today's move higher, Cerner is valued at a frothy 28 times forward earnings, and its growth rate is beginning to slow. It's a company I'd pass on based on valuation alone.

Craving more input? Start by adding Cerner to your free and personalized watchlist so you can keep up on the latest news with the company.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2079427, ~/Articles/ArticleHandler.aspx, 11/30/2015 8:58:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and investment planning. You'll often find him writing about Obamacare, marijuana, drug and device development, Social Security, taxes, retirement issues and general macroeconomic topics of interest.

Today's Market

updated 2 days ago Sponsored by:
DOW 17,798.49 -14.90 0.00%
S&P 500 2,090.11 1.24 0.00%
NASD 5,127.53 11.38 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

11/27/2015 12:59 PM
CERN $59.61 Up +0.10 +0.00%
Cerner CAPS Rating: ****