|52 Wk High
|52 Wk Low
|Market Growth LT||C|
|Market Growth ST||F|
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 $198.89 million in the 12 months ended last quarter, only a modest 12.00% gain from three years earlier, when total revenue in the equivalent 12 month period was $177.59 million. And now sales have started to decline as evidenced by the 11.24% year-over-year decline recently reported by the company. It said in its latest announcement that last quarter's total sales were $46.24 million compared to $52.09 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. It reported also that profit fell last quarter from the year earlier period, impacting also long term profit growth, which has been anemic in the last three years. We base long term profit growth on the change in full year (12-month trailing) net income from the comparable period three years before. Computer Programs and Systems,'s First quarter net fell 30.34% to $5.37 million from the year earlier profit of $7.72 million (excluding extraordinary items) , which contrasts with its growth in 12-month trailing profit over a three year period. Also including last quarter's results, the company's profit grew to $30.19 million for the 12 months ended March 31, 2015, a 15.62% jump from full year profit of $26.11 million reported for the period ended three years earlier. The company's ongoing margin contraction accelerated during its most recent quarter in which its EBITDA, operating and net margins fell an average of 9.49% from the year earlier period.
The company's May 01, 2015 announcement of First quarter results met analyst consensus estimates of $0.49 per share for the period. The report was welcomed by investors, who bid the stock up 7.07% following the news. Despite meeting the latest consensus estimate its average earnings surprise record is very poor; it has missed analysts' estimates by an average of 10.68% over the last six reports.
|Price/Cash Flow Ratio||A-|
Assuming the Company's Fundamentals Don't Deteriorate in Coming Quarters, the Stock's Valuation is Acceptable at this Level
Shares of Computer Programs and Systems, trade currently at 18.89 times the company's forward 12-month' earnings per share, which represents a small 3.36% premium to the MarketGrader-calculated optimum P/E ratio of 18.28. This ratio is based on the company's last two years of quarterly earnings, grouped in 12-month rolling periods to determine their growth rate. Computer Programs and Systems,'s earnings per share , based on this measure, have grown at an annualized -1.96% rate during this time. The recent contraction in profit margins could contribute to further deterioration in EPS growth and also lead to lower Profitability grades, both of which would have a negative effect on the stock. The stock's forward P/E of 18.89, 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 18.89. 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 7.20 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. Relative to the $3.57 in cash flow per share generated by the company in the last twelve months, the stock is attractively priced at 14.73 times cash flow per share considering its strengths across our fundamental indicators. Its price to sales ratio of 2.99 is slightly higher than the Services to the Health Industry's average of 2.35, both based on trailing 12-month sales. Finally, from a value perspective, we look at how much bigger the company's market capitalization is than its latest operating profits after subtracting taxes. Based on this measure Computer Programs and Systems,'s $594.52 million market cap is an acceptable valuation, representing a modest multiple of 17.57 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 $30.19 million in net profit it earned during the same period accounted for 15.18% of total revenue, a healthy net profit margin. The Services to the Health Industry industry had an average operating margin of 11.81% in the period. The company's operating margin of 22.84% exceeded that average by 81.50%. 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 37.44% during this time, even though this is below the 47.06% 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.
In spite of this recent downturn and given the still-strong performance by the company its leverage has plenty of room to grow considering Computer Programs and Systems, has no debt at all. Computer Programs and Systems,'s core earnings have shown a significant slowdown in the company's business based on twelve month trailing EBITDA of $49.36 million. This represents a 11.74% decline from the same period ended a year earlier in which the company's core operations generated $55.92 million. EBITDA is used as a measure of earnings power because it includes non-operating charges like interest expenses, income taxes and depreciation and amortization, which aren't even cash expenses. All of these are included in several areas of our analysis that look at EPS 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 3.64% to $13.64 million from the $13.16 million reported in the same period last year. This is significantly lower than the 7.48% 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, $40.77 million in cash on hand as of last quarter and a business that generated $29.25 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 $40.77 million in cash on hand last quarter compared to $29.25 million a year earlier, a 39.37% 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 56.33% return on $80.64 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 6.96%, which, when deducted from its return on investment results in an economic value added, or EVA, of 49.37%. 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, 2014 by 12.28%, to 64.00 cents a share from 57.00 cents. It has now distributed dividends uninterrupted for at least five years and based on this latest payout the stock is currently yielding 4.61%. Computer Programs and Systems, spent $26.41 million in common dividend payments in the last 12 months, which account for 66.98% of the company's cash flow and 87.48% of its after-tax earnings, an extremely large payout level. This represents an increase from the 78.49% 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.