Tech to Buy: Cerner
Medical software and technology stock Cerner (NASDAQ:CERN) might not be a well-known name to most investors, but this $12 billion company is worth a look. After all, it’s up about 50% in the past 12 months — more than three times the broader Nasdaq — and has tripled in the past five years.
But don’t think this is just a fad stock riding the tech sector. Cerner is a fast-growing company because it helps health care companies and hospitals run their operations efficiently, but it also has big growth potential thanks to its reach into digital patient records. This is a true secular growth story — with the baby boomer population increasing the need for companies serving the health care industry, and with technology steadily marching modern medicine into the digital age. Cerner is in the right place at the right time, plain and simple.
Yes, there always is the risk of competition. But as the pie gets bigger every year, that allows some room for error. And growth certainly hasn’t been a problem for CERN based on its track record — nine straight quarters of revenue growth and eight straight quarters of year-over-year profit increases. Forecasts are for another 22% in profit growth in 2012, too.
The valuation is a bit high on Cerner, at a P/E of about 28 based on fiscal 2013 earnings projections. But there are many reasons to expect this company to keep up its momentum.