Cerner Corp (CERN)

Cerner Corporation formed in 1979, is a major worldwide provider of Information Technology (IT) based solutions and devices to the healthcare industry. The company supports healthcare providers with secure access to clinical, administrative, and financial data in real time, with its Cerner Millennium architecture. Cerner revenues are segregated into System sales, Support maintenance and services and Reimbursed travel. System sales are revenues from the sale of software and hardware and sublicensed software, while Support maintenance and services involve professional and management services, which generates the major chunk of around 60% of the over all revenues.

The healthcare care sector is showing a changing trend from its old fashioned framework, to the new found reliance on IT. Initiatives in United States and across the world for the benefits of changing paper records to digital ones have made a positive impact on Health Care IT, with hospitals becoming center of the digital adoption. However just 14 percent of all U.S. physicians have automated their medical records, thus leaving a huge room for future growth. The US health care industry is expected to $34.7 billion by 2011, from $16.38 billion that it notched up in 2005.

Cerner is showing a healthy performance, with its increasing revenue and higher margins generated from the system sales. The stock recently has also witnessed a rise of around 5% on speculation of it being acquired by General Electric. The company’s future outlook appears promising, with a strong North American hospital pipeline and likelihood of winning large contracts due to strong hold in the market. Cerner also has a very healthy order book, and high book-to-bill ratio. Further, the likely hood of the takeover could generate much higher returns for share holder. However, in a no acquisition scenario, company’s strong fundamentals, huge cash flow as well as positive industry outlook, are enough of signs, to add Cerner in the portfolio.