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$33.77 -0.67 (-1.95%)
5/16/2008 4:00 PM

Quality Systems, Inc. (QSII)

CAPS Rating:
*****

The Company develops and markets healthcare information systems that automate aspects of medical and dental practices, networks of practices and management service organizations, ambulatory care centers, medical and dental schools.

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Avatar normansun (71.12) Submitted: 5/07/08 11:38 AM : Outperform Start Price: $33.50 QSII Score: -0.27

I think Quality Systems might be coming out of its 2 1/2-year funk. You'll notice the share price was stagnant over that period. That's because growth slowed from the torrid pace of 2003-2005. But QSII's biggest division, NextGen, grew 29% in the last quarter. Earnings growth has been 15% this year. The stock trades below mid-25x this year's earnings. If 20+% revenue growth is sustainable, the stock is a bargain.

Compare QSII to other players in this space like athenahealth (ATHN) - same market cap but ATHN barely generates earnings. Plus QSII pays a generous 3% dividend.

This company is worth $45-50 per share if it gets sold (which it might not). But the business might be picking up and in that case, we could see $40 without a sale. Also, reading between the lines, there could be an acquisition coming.

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