How Quality Systems Plans to Profit From Health Reform

Tomorrow, Quality Systems (NASDAQ: QSII  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

Quality Systems is a small company, but it has made a big impression in the medical-records business with its specialized data management systems. By allowing doctors and other medical professionals to manage information more efficiently, Quality Systems has sought to make itself an indispensable part of successful health-care practices, and the networking effects that it could reap in the long run are substantial. Let's take an early look at what's been happening with Quality Systems over the past quarter and what we're likely to see in its quarterly report.

Stats on Quality Systems

Analyst EPS Estimate

$0.28

Change From Year-Ago EPS

12%

Revenue Estimate

$117.31 million

Change From Year-Ago Revenue

7.6%

Earnings Beats in Past 4 Quarters

0

Source: Yahoo! Finance.

Will Quality Systems finally impress analysts this quarter?
Analysts have mildly downgraded their earnings estimates for Quality Systems over the past several months, leaving their calls for the March quarter unchanged but cutting their fiscal 2014 projections by $0.02 per share. But the stock really hasn't gone anywhere lately, falling 1% since mid-February.

Quality Systems offers a comprehensive set of electronic offerings for health care, going beyond medical records to provide payment and collection recordkeeping as well as specialized software for dental practices and their own unique needs. As Obamacare and other health-care reform efforts take effect, the need for medical professionals to be as efficient as possible increases, and Quality Systems aims to make that job easier for them to tackle.

Quality Systems certainly has plenty of growth potential. Late last month, competitor Cerner (NASDAQ: CERN  ) announced record bookings for its first quarter, and with a strong backlog and favorable guidance for the full 2013 year, Cerner is finding promising ways forward to grow its business. Cerner's results point to strength not just within the company but for the broader industry as well, and Quality Systems is poised to tap into the generally positive environment.

One big opportunity that Quality Systems will try to cash in on this year is the trend toward medical professionals switching their electronic-health-records vendors. With one survey showing that as many as 1-in-6 of every users wanting to make a change, the industry could go through a big upheaval. Unfortunately for Quality Systems, its customer rankings are relatively low, and it appears that rival athenahealth (NASDAQ: ATHN  ) could end up drawing business away from Quality Systems and peer Allscripts (NASDAQ: MDRX  ) based on their respective perceptions by customers.

In Quality Systems' report, look for innovative ways in which the company expects to find new growth. The example of up-and-coming rival Medidata and its focus on managing the FDA approval process for drug companies illustrates how Quality Systems needs to keep thinking outside the box and look for further value-added offerings that fit with its overall mission of making it easier for medical professionals to do their jobs.

Obamacare will undoubtedly have far-reaching effects that go well beyond medical records. The Motley Fool's new free report, "Everything You Need to Know About Obamacare," lets you know how your health insurance, your taxes, and your portfolio will be affected. Click here to read more. 

Click here to add Quality Systems to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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: 2446706, ~/Articles/ArticleHandler.aspx, 9/30/2014 8:07:39 PM

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...


Advertisement