Healthcare Stocks: Cerner (CERN)
When it comes to achieving success with the Affordable Care Act, don’t underestimate the power of information technology to help or hinder the progress. Given the disastrous technical problems that attended last fall’s launch, the heat is on all parties to ensure that the technology works as advertised.
Cerner (CERN) is a key player in the health information systems space and it could find a particularly lucrative role as a problem solver in 2014. One particular focus of innovation is electronic medical records (EMRs). According to a new report by Utah-based KLAS Research, nearly half of all large hospitals will invest in new EMR technology by 2016.
CERN’s strong focus in that niche could drive profitability — and share price — over the next two years, particularly as pressures rise to make health information systems more secure and interoperable. So far this year, CERN has gained more than 8%. The fact that CERN is trading at more than 30 times forward earnings and has a PEG ratio of 2 makes it look overvalued, compared to other healthcare stocks. However, the explosion of EMRs is likely to make CERN an attractive growth play.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.