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As Sasha mentioned in early February we added Cerner to the stocks that we cover. They provide technology to the healthcare industry, the core of their business is moving as much information from paper to digital, with what they call Electronic Medical Records (EMR). Cerner's aim is "support evidence-based clinical decisions, prevent medical errors and empower patients in their care." Moving patient information to digital means that one set of records are kept for a patient that can then be accessed by the doctor treating them or the patient themselves.
Moving to digital is a win for everyone involved. For the doctors they have quick access to all the patients' data, meaning that they can make a more informed decision about what is wrong. For the patient, you want to know that the doctor has quick and easy access to all your medical records. The human body is very complex and the more data that is at the hand of the doctor the better. Then for hospitals this system gives them the ability to offer better products and be more efficient which will lead to cost saving.
On the Cerner webpage they say that 98000 people die a year due to medical error. Some of these errors could be as trivial as bad doctor handwriting or giving medication that the patient is allergic to. That is a scary figure!
They only have a market cap of $17 billion on a PE of 43, so they are small and pricey but you are paying for the huge growth potential. Revenue for the quarter past was up 15%, their gross margins grew from 81.3% to 83.5%, with EPS growing 9.7%. For the next quarter revenue is expected to grow 11.7% - 17.3%, and more importantly EPS is expected to be up 14.9% - 17.9%.
As a patient (and most likely doctors) in a couple of years I will avoid hospitals that do not have an EMR system, and going forward healthcare treatment will be customised to your DNA which means having EMR is even more important. Given the huge growth potential in this sector, margin growth and the strong earnings growth this definitely a stock to have in your portfolio.