Wednesday, October 26, 2011

Quality Systems Inc (QSII) 2011 Review

Quality Systems (QSII) Inc develops and markets healthcare information systems in the US; they include systems that automate medical and dental practices and networks of practices such as physician hospital and management services organizations, ambulatory care centers and medical and dental schools. 

In addition, QSII offers proprietary electronic medical records under the NexGen product name.

Its products include electronic health records, enterprise appointment scheduling, enterprise master patient index, NexGen image control systems, managed care server, electronic data interchange, system interfaces, Internet operability and patient-centric and provider-centric Wed portal solutions, NexGen Express for small practices, revenue cycle management services which include billing and collections services.

The company has grown profits at a 25%+ rate over the past five years and raised dividends from $.88 a share in 2005 to $1.25 a share in 2010. Return on equity has averaged 25%+ over the last five years.

The company should continue to grow at a rapid pace as a result of:

(1) expansion of its client base, its product offerings and the rising demand of its clients for its expertise,

(2) acquisitions: QSII recently acquired Opus Healthcare Solution, which provides web based clinical solutions to hospital systems and Healthcare Strategic Initiatives, which expands the company’s presence in the revenue cycle management market.


(1) it is in a highly competitive industry,

(2) the growth rate of its dental division is slowing,

(3) an aggressive acquisition strategy can dilute management attention from running its base business,

(4) its distribution channel is a weakness,

(5) pricing pressures.

QSII is rated A by Value Line, had no debt and its stock yields 1.6%

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2001
QSII 1.6% 11% 56% 4*
IND 1.4 13** 20 NA
Debt/Equity ROE EPS Down Since 2001 Net Margin Value Line Rating
QSII 0% 27% 0 17% A
IND 20 25 NA 26 NA

* QSII has only paid a dividend for 6 years
**most companies in QSII industry do not pay dividends


Note: QSII stock made great progress off its March 2009 low, quickly surpassing the down trend off its September 2008 high (straight red line) and the November 2008 trading high (green line). Long term the stock is in an up trend (blue lines); intermediate term, it is also in an up trend (purple lines). The wiggly red line is the 30 day moving average. The Aggressive Growth Portfolio owns a full position in QSII. The upper boundary of its Buy Value Range is $90 (following the $4 decline yesterday, the stock goes on the Aggressive Growth Buy List); the lower boundary of its Sell Half Range in $142.