|52 Wk High
|52 Wk Low
|Market Growth LT||B-|
|Market Growth ST||B+|
Mixed Growth Record Based on Company's Recent Reports Suggest Investors Use Caution in Buying the Stock
According to its latest earnings report, Computer Programs and Systems, booked $53.33 million in total revenue last quarter, a 14.00% rise from the year earlier period's $46.78 million, which is not only a healthy increase but an improvement from its long term sales growth. Also including the latest quarter the company had $209.75 million in 12-month trailing revenue, only 20.31% higher than the $174.34 million booked during the equivalent period ended three years ago, a modest increase in such timeframe. The next couple of quarters will help investors determine if the recent increase in top line growth is sustainable and whether it will lead to higher profits. Profits grew very strongly last quarter compared to a year ago while full year net income showed healthy gains from three years before. Its net income rose 26.60% to $9.20 million in its most recent quarter from $7.27 million (excluding extraordinary items) in the year earlier period, while full year profit for the 12 months ended on September 30, 2014 of $35.92 million was 38.47% higher than full year net of $25.94 million reported three years earlier. During the last quarter the company's cash flow, operating and net margins grew by an average of 10.48% from a year earlier, extending a positive trend from its two previous quarters.
Despite meeting the consensus estimate of $0.83 per share in its Third quarter report, announced October 31, 2014, the company's stock dropped -3.26% following the announcement, a sign investors were expecting the company to beat the street or provide better guidance for future earnings. It has now exceeded the consensus earnings estimate by an average of 0.03% in its last six reported quarters, a favorable indicator for the stock.
|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, stock is currently trading at 17.60 times forward 12-month' earnings per share, a moderate 7.43% discount to our "optimum" P/E of 19.01, which can be justified by the company's EPS growth rate. In order to calculate this ratio, MarketGrader looks at the company's earnings per share over the last two years, in 12-month rolling periods, to arrive at its growth rate. By this account, Computer Programs and Systems,' earnings per share have increased at a 14.12% annualized rate in 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 17.60, 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 17.60. 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 8.20 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 15.94 times the $3.70 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 3.15 is slightly higher than the Services to the Health Industry's average of 2.24, 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 $660.88 million market cap is an acceptable valuation, representing a modest multiple of 16.72 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 $35.92 million in net profit it earned during the same period accounted for 17.13% of total revenue, a healthy net profit margin. The Services to the Health Industry industry had an average operating margin of 12.71% in the period. The company's operating margin of 26.79% exceeded that average by 98.04%. 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 45.30% during this time, even though this is below the 49.76% 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 $59.96 million, or 18.67% above the $50.53 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||A+|
|Debt/Cash Flow Ratio||A+|
|Interest Cov. Capacity||A+|
Company's Cash Flow Is Very Well Managed as Our Analysis Reflects a Very Healthy Operation
Computer Programs and Systems,'s cash flow grew considerably in its latest quarter to $11.60 million, a 53.66% increase from $7.55 million reported in the year earlier period. This represents a faster growth pace than when measured on a trailing twelve month basis considering cash flow rose 42.76% over this period compared to the twelve months ended a year earlier. This continued improvement should benefit the company's margins and provide a boost to the bottom line. The company clearly has very strong liquidity having no debt to finance, $28.69 million in cash on hand as of last quarter and a business that generated $13.61 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 $28.69 million in cash on hand last quarter compared to $13.61 million a year earlier, a 110.77% 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 70.85% return on $79.31 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 5.55%, which, when deducted from its return on investment results in an economic value added, or EVA, of 65.30%. 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 3.76%. Computer Programs and Systems, spent a total of $24.83 million over the last 12 months in common dividend payments, or 60.87% of its cash flow and 69.12% of total after tax earnings, an extremely large payout ratio. Even though this ratio is slightly lower than the 70.88% of earnings paid out in the 12 months ended just a quarter ago, it needs to be reduced more aggressively in order to avoid eroding the firm's liquidity and damaging its balance sheet. At least the company's generally healthy fundamentals provide it with some breathing room to make the necessary adjustments before the situation becomes dire.