Cerner FY numbers - Record bookings

15-FEB-18

Last week one of our smaller holdings, Cerner released their FY numbers. They are the guys that are trying to remove all the paperwork you have to fill in every time you visit a medical professional. The goal is to create a network where you complete your information once, then from there, all doctors have access to it. Saving trees and saving you time. More importantly though, having the data in digital format, lowers the risk of bad handwriting leading to wrong diagnosis or the wrong procedure being done.

Built on to that is Cerner's management system, where hospitals can then use the information to easily see revenue and expense figures. It also allows them to see what operations are in the pipeline, meaning accurate forecasts can be made. Probably the most exciting part of the business is where they unleash AI onto the data. The clever algorithms take the data fed to it from all your medical tests, and at some stage in the future from your smartwatch too, and issue early warning signals around potential health issues.

Due to the time required and the capital-intensive nature of revamping a hospital group's computer systems, Cerner has a 'book' similar to that of construction company. For the 4Q, they had a record number of bookings, $2.3 billion, up 62% YoY. Over the last year, their revenue came in at $5.1 billion up 7% YoY. From that revenue they made a profit of $867 million.

Cerner ticks all the boxes, it is a technology company in the medical space. It is also defensive because once a hospital chooses Cerner, it is not easy to move to a competitor. Thanks to those characteristics, it trades on an 'expensive' 24 times earnings. Management expects earnings to grow by 11% over the next year so the multiple isn't going to unwind in a hurry. With many things in life, you get what you pay for. Paying up for Cerner is one of those things in our opinion.