Athenahealth Hits 52-Week High - Analyst Blog
March 18 2013 - 6:00AM
Zacks
Shares of Athenahealth,
Inc. (ATHN) hit a new 52-week high of $99.79, before
closing on Friday, Mar 18 at $97.82. The share price of this
leading provider of Electronic Health Care (EHR) solutions for
ambulatory care and hospital settings has been on an upward trend
since it reported fourth quarter 2012 results on Feb 7.
Drivers that Triggered
Momentum
A positive fourth quarter earnings
surprise and improved business prospects following the acquisition
of Epocrates facilitated the shares of Athenahealth to gather
momentum and achieve a new high.
Athenahealth reported fourth
quarter adjusted earnings per share of 18 cents beating the Zacks
Consensus Estimate of 16 cents. Reported net income in the fourth
quarter increased 11.5% year over year to $5.9 million (or 16 cents
per share).
Athenahealth revealed, earlier in
Mar, that it accomplished the takeover of Epocrates, a pioneer of
mobile health workflows and point-of-care (POC) health apps. The
composite company is well placed to bring to market fresh mobile
workflows to meet the data requirements of clinicians. Furthermore,
Athenahealth’s provider network of 40,000 now encompasses over a
million clinicians from the Epocrates set up.
Following several prominent client
wins, Athenahealth is better positioned to win deals in the
enterprise segment.
On the negative side, the Stimulus
which promoted EHR is gradually being withdrawn. While greenfield
opportunities are shrinking, the replacement market is nonetheless
growing.
Stock’s Key
Indicators
Athenahealth is more expensive than
its peer group as per most metrics such as forward P/E,
price-to-sales ratio and price-to-book ratio. However, given the
company’s higher long-term growth rate of 25% versus the peer group
at 19.1%, the premium valuation may well be justified.
About the
Company
Athenahealth’s web-based deployment
provides a low-cost scalable service while its flexible rules
engine leads to higher efficiency in claims settlement. The
Software-as-a-Service (SaaS)-based approach allows for a more
flexible delivery mechanism that helps Athenahealth win deals. The
company has traditionally enjoyed high customer satisfaction rates,
which facilitates a larger number of referrals.
Athenahealth’s unique business
model makes it a strong provider of RCM services (athenaCollector)
designed for small physician practices. Its EHR product
(athenaClinicals) is a key player in ambulatory settings. We
believe that sales of athenaClinicals are likely to remain robust.
In addition, the company will harness its newer products, namely
athenaCommunicator and athenaCoordinator.
Athenahealth should benefit from
its extensive athenaCollector client base, as only a minority of
its subscriber base also utilizes athenaClinicals. Cross selling
represents a real growth opportunity in the near term. In this
regard, Athenahealth has made rapid strides in capturing the EHR
business of physician practices. However, this segment is
shrinking, as hospitals increasingly absorb physician’s medical
practices. Competition is intense with established players such as
Cerner Corporation (CERN) and Allscripts
Healthcare Solutions, Inc. (MDRX).
The company has a Zacks Rank #3
(Hold). We are more positive about Merge Healthcare
Incorporated (MRGE), which carries a Zacks Rank #2 (Buy)
and is expected to do well.
ATHENAHEALTH IN (ATHN): Free Stock Analysis Report
CERNER CORP (CERN): Free Stock Analysis Report
ALLSCRIPTS HLTH (MDRX): Free Stock Analysis Report
MERGE HEALTHCAR (MRGE): Free Stock Analysis Report
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