) 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gradually being withdrawn.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
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
Allscripts Healthcare Solutions, Inc.
The company has a Zacks Rank #3 (Hold). We are more positive
Merge Healthcare Incorporated
), which carries a Zacks Rank #2 (Buy) and is expected to do
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