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 cloud-based health-care management services company Greenway Medical Technologies (NYSE: GWAY) dove as much as 15% before recovering more than half of its losses, after reporting its first-quarter earnings results.
So what: For the quarter, Greenway recorded 28% year-over-year revenue growth to $32.8 million, as well as a 262 basis point gross margin expansion, to 54.4%. While revenue squeaked past Wall Street's consensus, the company's breakeven EPS fell $0.02 shy of what analysts had been expecting.
Now what: Yes, Greenway is an expensive IT health-care provider at 36 times forward earnings, but there are a few key points worth noting. First, the company's application platform is based on recurring revenue; so, once it becomes healthfully profitable, remaining profitable shouldn't be too difficult. Secondly, it's begun landing major partners, as evidenced by its electronic health records deal recently signed with Walgreen (NASDAQ:WBA). Lastly, the company's gross margin is heading in the correct direction, which isn't often the case with rapidly expanding IT-based solution providers. Overall, I think you can look at today's dips as a possible long-term buying opportunity.
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