Analysts expect this health care technology company to grow by more than 12% next year.
New Mid-Year Update
Cerner (CERN)
From Logos LP Blog
Cerner (CERN), the healthcare IT service provider, is trading at a discount to a number of historical metrics: its price-to-book is at a 5-year low, price-to-sales is at a 1 year low, PE ratio is at 5 year low and the company has very little debt.
The company has held very consistent gross margins (near 83% for the last 10 years) and revenue growth despite trading at a FCF multiple of only 14.7x. Moreover, free cash flow per share and book value per share (which continue to grow at a healthy clip) have grown by 5x and 3.5x, respectively.
The company has also seen increasing ROE and ROIC and over 14% of the firm’s sales is converted into cash flow (versus cap ex to sales at 10%), which is the strongest it has ever been since 2011 and indicates strong value creation for shareholders. On the downside, the company has had some execution problems which has contributed to slowing growth, particularly in the last quarter. However, we believe these are temporary, and given the global and increasing demand for healthcare IT and the stickiness of the service, the company has a very wide moat with long tailwinds.
We believe revenue and earnings growth will be higher than expected in the latter half of the year and our price target on the name is $76.
Peter Mantas, logoslp.com/, info@logoslp.com, 647-226-0135, July 5, 2018