Quantifying Quality Systems (QSII)
February 15, 2009
Quality Systems Inc. (QSII) was this month’s Online Stock study at the Better Investing website. QSII makes health care information systems that automate numerous functions including billing and insurance claims, electronic medical and dental records, drug formularies, and appointment scheduling. It sells primarily to doctors and dentists in group practices, to health centers, and to medical and dental schools.
Ken Kavala, who led the Online study, is a BI guru volunteer who specializes in small company stocks. He writes a periodic column for Better Investing magazine on small stocks and also led the September 2008 Online study on Neogen, another small company stock that I discussed in a previous post, see: Knowing Neogen, 9-8-2008
Ken decided to lead this study much differently: participants got to vote for each judgment as usual but, unlike all previous Online studies, Ken got to make all of the final decisions. Why you ask, why ask participants to vote if you are not going to follow their consensus? Good Questions!
Materials available for downloading are the recorded session, Ken’s presentation slides, Ken’s SSG, and the Value Line report.
QSII consists of two divisions, QSI and NextGen. QSI targets dental practices and contributed 8% of last year’s revenue while NextGen, a wholly owned subsidiary, specializes in medical practices and contributed 92% of last years revenue. QSII currently ranks #4 on Forbes’ list of the 200 Best Small Companies, was #5 last year, and has been on the list for eight consecutive years.
Better Investing defines small companies differently than Forbes. BI uses Revenues or Sales, not capitalization, and Ken considered less than $500 M in Sales as Small. Other gurus use $400 M as a cut-off. With $186.5 M is Sales last year, QSII meets either definition.
Here’s a chart comparing Ken’s SSG with three others and with Take Stock (a/k/a Quantifying QSII). My assessment and conclusions follow.
Quality Systems (QSII) |
Ken K from BI’s Online Study |
Jim C from BI’s First Cut |
Armin -1 |
Armin -2 |
Take Stock |
Date |
2-4-09 |
11-23-08 |
12-24-08 |
2-6-09 |
2-4-09 |
Data |
S&P |
same |
same |
same |
Hemscott |
Price |
$37.10 |
$31.13 |
$44.31 |
$37.17 |
$37.11 |
52 week High & Low Price |
$47.94 & $25.70 |
same & $26.90 |
same & $25.70 |
same & same |
n/a |
|
|||||
Project Growth From |
Last Annual |
Last Quarter |
Last Quarter |
same |
Last Annual |
Sales Growth |
17.00% |
18.00% |
15.00% |
same |
18.60% |
EPS Growth |
16.99% |
18.00% |
15.00%
|
same |
18.60% initial 16.10% final |
High PE |
30.0 |
28.0 |
30.0 |
28.4 (Alt-M) |
28.0 |
High EPS |
$3.09 |
$3.23 |
$3.12 |
$3.30 |
$3.05 |
High Price |
$92.70 |
$90.40 |
$93.60 |
$93.70 |
$85.40 |
Value Line Estimated High Price = NONE |
|||||
Low PE |
15.0 |
17.0 |
14.6 |
12.0 (Alt-M) |
19.7 |
Low EPS |
$1.64 (TTM) |
$1.55 (TTM) |
$1.55 (TTM) |
$1.64 (TTM) |
$1.57 (TTM) |
Low Price |
$21.15 (low PE x low EPS) |
$26.10 (recent severe low) |
$22.60 (low PE x low EPS) |
$19.70 (same) |
$32.30 (low PE x low EPS) |
Upside/Down |
3.48 |
11.7 |
2.3 |
3.2 |
10.04 |
Total Return |
22.59% |
27.40% |
19.60% |
23.90% |
20.10% |
|
|||||
SSG Buy Under |
n/a |
n/a |
$40.35 |
$38.20 |
$45.55 |
RV/PRV |
n/a |
74.4/63.0
(3 years outliers) |
104.0/ 90.4 (1 year outlier) |
82.5/71.7
(same) |
n/a |
RV/PRV (no outs) |
n/a |
n/a |
95.7/83.1 |
75.9/65.9 |
n/a |
Quality |
n/a |
n/a |
S&P = B 5 out of 8 |
same |
TS = 10 top rating |
|
|||||
PTPM – 5 yr ave |
30.46% trend n/a |
30.5% trend up |
same |
same |
30.5% trend n/a |
ROE – 5 yr ave End Equity |
28.69% trend n/a |
31.7% trend up |
28.7% trend up |
same |
n/a |
ROE – 5 yr ave Start Equity |
n/a |
n/a |
33.6% trend up |
same |
33.8% trend n/a |
Debt to Equity – 5 yr ave |
n/a |
n/a |
-0- trend even |
same |
n/a |
DISCUSSION:
This Online study used Better Investing’s Online SSG to analyze QSII while some prior studies used SSG software. My SSGs and JimC’s used the Toolkit 5 software.
The Online SSG is much more limited than SSG software. For example, the Online SSG is limited to projecting future growth only from the end of the last annual data point while the software offers three choices. And, the Online SSG is limited to only one method for estimating the Forecast Low Price in the next 5 years while the software offers four methods.
(A) KenK’s SSG
– One of the first things Ken did was to replace the peers automatically selected by the Online SSG with three competitors: CERN, ELIP and MCK. Peers and not the same as competitors and savvy users can replace them if they know where to find competitors. Two web sites I use are Hoovers.com and YahooFinance, both of which show that the direct or top competitors of QSII are somewhat different than Ken’s picks: CERN, AMCS and GE Healthcare (pvt).
– Ken then compared QSII to the three competitors he chose and found that it was better in terms of Sales and EPS growth, Pre-Tax Profit, and Return on Equity This slideshow could not be started. Try refreshing the page or viewing it in another browser.