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MedAssets: A Strong Buy on Extended Ties & Solid Q2 Results

On Oct 6, Zacks Investment Research raised MedAssets, Inc.MDAS to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

A string of extended partnerships and a stellar second-quarter performance can be cited as the main reasons behind the upgrade. The extended ties with various companies open up significant prospects for MedAssets.

MedAssets provides Spend and Clinical Resource Management (SCM) as well as Revenue Cycle Management (RCM) services to clients.

Recently, CA-based San Antonio Regional Hospital renewed its strategic partnership with MedAssets to drive considerable cost cut. The companies have been working together since 2010 and MedAssets has helped San Antonio Regional Hospital achieve average annual savings of about $1 million.

In Aug 2015, University Health Shreveport stated that it will continue to use MedAsset's total performance management capabilities to provide low-cost, quality treatment to patients. UMass Memorial Health Care also extended its strategic alliance with MedAssets. Furthermore, MedAssets expanded its purchased services approach through a strategic partnership with Valify. Meanwhile, MedAssets incorporated a new web-based analytics solution, which will present additional savings opportunities for its clients.

It is to be noted that MedAssets' earnings have managed to beat the Zacks Consensus Estimate by an average of 7.7% over the last four quarters.

In the second quarter of 2015, MedAssets reported impressive results wherein both its top as well as bottom line outpaced the Zacks Consensus Estimate. Adjusted earnings per share of 25 cents (including stock-based compensation expense) managed to beat the Zacks Consensus Estimate of 22 cents, while revenues of $190.4 million steered past the Zacks Consensus Estimate of $187 million.

Additionally, the company provided an upbeat outlook for 2015 with adjusted EPS anticipated in the range of $1.20-$1.26, compared with the earlier projection of $1.13-$1.23. Net revenue, on the other hand, is projected in the range of $756-$768 million, compared with the earlier forecast of $753-$767 million.

Estimate Revisions

The Zacks Consensus Estimate for fiscal 2015 is currently pegged at $1.04 per share, which moved up nearly 3% over the last 60 days. Over the same time frame, the Zacks Consensus Estimate for 2016 has been revised upward by a penny to the present $1.11 per share.

Other Key Picks

Other well-placed stocks in the medical sector are Masimo MASI , Thoratec THOR and NuVasive NUVA with a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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