|52 Wk High
|52 Wk Low
|Market Growth LT||B-|
|Market Growth ST||D|
While Not Entirely Negative, Growth Indicators Show Several Signs of Weakness
Computer Programs and Systems, has been struggling with anemic sales growth for some time and now, based on its latest quarterly report, it has dipped into negative territory. The company had total revenue of $203.20 million in the 12 months ended last quarter, only a modest 17.31% gain from three years earlier, when total revenue in the equivalent 12 month period was $173.21 million. And now sales have started to decline as evidenced by the 0.39% year-over-year decline recently reported by the company. It said in its latest announcement that last quarter's total sales were $53.05 million compared to $53.26 million a year earlier. These results underscore a very worrisome trend marked not only by a recent downturn in Computer Programs and Systems,'s business but also an inability to show sustainable long term growth that could lead to higher profits. In its latest announcement it also posted healthy profit gains both on a year-to-year basis and over a three year period when comparing full year results, using four rolling quarters of net income for the latter comparison. Its net income rose 5.62% to $8.96 million in its most recent quarter from $8.49 million (excluding extraordinary items) in the year earlier period, while full year profit for the 12 months ended on June 30, 2014 of $33.99 million was 36.83% higher than full year net of $24.84 million reported three years earlier. During the last quarter the company's cash flow, operating and net margins grew by an average of 8.98% from a year earlier, extending a positive trend from its two previous quarters.
The company's August 01, 2014 Second quarter earnings report fell 1.22% below analysts' consensus estimates for the period, sending the stock down 4.34% from the day before to the day after the announcement. Despite this negative report, its earnings surprise record continues to be positive, having exceeded analysts' estimates by 0.39%, on average, in the last six reported quarters.
|Price/Cash Flow Ratio||B+|
Assuming the Company's Fundamentals Don't Deteriorate in Coming Quarters, the Stock's Valuation is Acceptable at this Level
Computer Programs and Systems,'s stock, currently priced at 18.11 times forward 12-month' earnings per share, trades 11.18% higher than our "optimum" P/E ratio of 16.29. This ratio, calculated by MarketGrader, is determined by the growth in the company's earnings in the last two years, measured over 12-month rolling periods. Based on this formula Computer Programs and Systems, has grown earnings per share at a 13.15% annualized rate during the last two years. A high P/E multiple for this stock may be well justified considering such a strong rate combined with the apparent margin expansion and a very positive Profitability grade. This mix suggests the company is making sustainable market share gains that will benefit its financial results in the long run. The stock's forward P/E of 18.11, based on its earnings estimate for the next four quarters, represents a premium to the S&P 500 index's forward P/E of 15.20 but is lower than its trailing P/E of 18.11. Therefore value could apparently be found in the company's future earnings growth even though relative to the market the stock might not seem cheap (the fundamentals may already be factored into the price). But assuming the company remains fundamentally strong, the stock might have further room to run, or at least be a relatively safe place to be if earnings estimates materialize into actual reported results.
Computer Programs and Systems,'s market value is currently 9.01 times its total book value, a fair valuation when you consider none of the company's total stockholders' equity is made up of intangible assets such as goodwill. While recording some intangible assets is not necessarily a bad thing, a low percentage of intangibles versus other assets suggests the company's accounting is conservative. Its shares seem reasonably priced at 18.39 times the $3.33 in cash flow per share generated by the company over the last twelve months, if only because its overall fundamentals are pretty healthy. Its price to sales ratio of 3.38 is slightly higher than the Services to the Health Industry's average of 2.35, both based on trailing 12-month sales. Our final value indicator looks at the relationship between the company's current market capitalization and its operating profits after deducting taxes. Based on this measure Computer Programs and Systems,'s $687.33 million market cap is an acceptable valuation, representing a modest multiple of 18.30 times its latest quarterly net income plus depreciation.
|Return on Equity||A+|
|Quality of Revenues||A+|
Profitability Record Is Excellent Across the Board Suggesting a Very Well Managed Operation
Computer Programs and Systems, is very profitable and this is reflected across the board in this category's indicators, with operating margins that exceed its peer group average and a very solid return on shareholder equity, all based on 12-month trailing data. The $33.99 million in net profit it earned during the same period accounted for 16.73% of total revenue, a healthy net profit margin. The Services to the Health Industry industry had an average operating margin of 12.88% in the period. The company's operating margin of 26.10% exceeded that average by 89.79%. Based on how much it has earned in the last four quarters, the return on Computer Programs and Systems,'s common equity has been a remarkable 45.31% during this time, even though this is below the 50.80% return on equity achieved in the year-earlier period. This metric plays an important role in how our system measures a company's management efficiency.
The company has no debt, which gives it plenty of room to find capital if necessary in light of the recent downturn in its numbers. However, it is still very profitable and nothing currently indicates it would need to take such a step. Computer Programs and Systems,'s core earnings in the last twelve months grew moderately from the twelve months ended a year earlier. The company's EBITDA for the most recent period was $56.84 million, or 14.89% above the $49.47 million earned from its core operations in the prior period. EBITDA is used by MarketGrader to measure the company's true earnings power since it includes interest expenses, income taxes, depreciation and amortization, all non-operating expenses, which are nevertheless accounted for in other parts of our analysis that look at EPS gains and net income.
|Cash Flow Growth||D|
|Debt/Cash Flow Ratio||A+|
|Interest Cov. Capacity||A+|
Company's Cash Flow Indicators Are Solid Across the Board but Offer Some Room for Improvement
Computer Programs and Systems, showed a small improvement in its quarterly cash flow during the latest period, in which it grew by 4.95% to $1.32 million from the $1.25 million reported in the same period last year. This is significantly lower than the 33.90% growth in twelve month trailing cash flow, an indication of a sharp slowdown in the company's core operating income and overall business environment. The company clearly has very strong liquidity having no debt to finance, $24.01 million in cash on hand as of last quarter and a business that generated $12.27 million in earnings before interest, taxes, depreciation and amortization in the same period. This affords it significant flexibility to take on debt if it wanted to pursue new growth opportunities such as an acquisition. The company had $24.01 million in cash on hand last quarter compared to $12.27 million a year earlier, a 95.68% increase. It continues to have no debt.
Our Economic Value indicator measures the company's ability to generate a true economic profit by taking into account not only the costs of running the business but also the cost of capital. In Computer Programs and Systems,'s case, since the company has no debt, we only look at the cost of equity, which is to say the opportunity cost to an investor of having his capital tied up in the company's shares instead of some other investment. Based on its 12-month trailing operating income, Computer Programs and Systems, generated a 70.71% return on $75.01 million of invested capital. Since it has no debt this simply includes all forms of equity. Its after tax cost of equity during the last year was 7.29%, which, when deducted from its return on investment results in an economic value added, or EVA, of 63.42%. This is a remarkable return to its shareholders, more than justifying their investment in Computer Programs and Systems,'s shares. The company increased its quarterly common dividend on September 30, 2013 by 11.76%, to 57.00 cents a share from 51.00 cents. It has now distributed dividends uninterrupted for at least five years and based on this latest payout the stock is currently yielding 3.52%. Computer Programs and Systems, spent $24.09 million in common dividend payments in the last 12 months, which account for 65.57% of the company's cash flow and 70.88% of its after-tax earnings, an extremely large payout level. This represents an increase from the 69.69% of earnings paid out in the 12 months ended just a quarter earlier. While the company's fundamentals are generally positive, the increase in the payout to such high levels threatens to erode the firm's liquidity and strain its balance sheet.