First Cut Stock Study Report

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First Cut Stock Study Report

Company Name: Computer Programs and Systems Ticker: CPSI

Date of Study: 11/11/2014 Price: $ 61.74

Your Name: Joyce Ivanovitch

Email address: [email protected]

City: New York State: NY

Chapter Name (if applicable): New York Chapter

Discuss why you consider this to be a high quality, growth company that should be investigated further. Please include comments on historical sales and EPS growth, pre-tax profit margin, return on equity, and debt.

Earnings are growing faster than sales -- a harbinger of a rising stock price. 10-yr historical sales averaged 9.3%; past 5 years 10.5%;& current Q3 yr/yr , 14%.

10-yr historical EPS grew 13.9%; past 5 years 15.7%; & current Q3 yr/yr EPS 27.3%

Pre-tax profit margin averaged 22.1% for last 5 years, and was 25.2% in 2013 ROE averaged 49.1% for last 5 years, and was 57.1% in 2013

Debt is minimal, and essentially considered "no debt."

Briefly describe how the company makes money:

Founded in 1979, CPSI is a healthcare information technology company that designs, develops, markets, installs and supports computerized information technology systems to meet the unique demands of small and midsize hospitals. CPSI provides electronic health records (EHR) systems for more than 650 community, rural and critical access hospitals and their 12,000 providers in 46 states and the District of Columbia.

Projected growth rate for sales: a conservative 9.5%

Why did you select this rate? Discuss from where future growth will come.

I chose a likely sustainable, though conservative, growth rate.

Future growth will come from the healthcare transition to electronic health record (EHR) systems.

Projected growth rate for earnings per share: 10%

Why did you select this rate?

A 10% EPS est'd growth rate is at the lower end of Analysts' estimates. Morningstar est'd growth of 8.5% to 11.5% = median 9.8%

Reuters est'd growth of 8.8% to 15% Yahoo est'd growth of 9.7%

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Zacks est'd growth of 14.3%

TK6 Consensus Analysts est'd growth of 14.5% on 5-yr EPS of $6.40

Projected High P/E: 26.9

Why did you select this value?

The 5-year average high P/E is 28.8

Eliminating 2009 reduced the P/E to a more conservative 26.9

Projected Low P/E: 16.4

The 5-year average low P/E is 17.1

Eliminating the highest 5-yr low P/E reduced the avg low P/E to a more conservative 16.4

Projected Low Price: $48.40

Avg. Low P/E: 16.4 X Estimate Low Earnings/Share 2.95 = Forecasted Low Price: $48.40

At the current price, the stock is a (check one): Buy or Hold or Sell

At the current price, the upside-downside ratio is: 5.9 to 1 Compound Annual Return – Using Forecast High P/E: 20.6% Your final recommendation (check one):

Buy or Hold or Sell Explain:

CPSI provides a complete information and patient care system from business office to bedside combined with comprehensive implementation, training and ongoing support from a staff of more than 1,400 healthcare and business professionals.

CPSI is the clear leader in the small hospitals and clinical practice markets of electronic health record (EHR) systems. CPSI clients benefit from The American Recovery and Reinvestment Act (ARRA) incentives which

encourage the implementation and utilization of a certified electronic health record.

The Electronic Health Records industry is here to stay with the market continuing its growth, with or without the American Recovery and

Reinvestment Act and the Affordable Care Act (ACA).

At around $62/share, a P/E ratio of 19.0 vs. a peer average of 27.6, and a 3.6% dividend, CPSI is a strong buy and long-term hold.

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Additionally, considering its small market cap size of $79.3m, CPSI could be a buyout candidate at some point in the future

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www.iclub.com Growth Analysis Growth Analysis Growth Analysis Growth Analysis % % % % Percentage Change Year Ago Quarter

Latest Quarter % Institutions % Insiders Debt($M) Preferred($M) Diluted(M Shares)

(3) Historical Earnings Per Share Growth (4) Estimated Future Earnings Per Share Growth (6) Earnings Per Share Growth R 2

(2) Estimated Future Sales Growth (5) Sales Growth R2

(1) Historical Sales Growth

SALES

($M) PER SHARE ($) EARNINGS RECENT QUARTERLY FIGURES

% Debt to Tot.Cap. Sector Quality

Stock

Study

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Reference Industry Price Date Data Source Last Judgment Data Date Study by Company 1 2 3 4 5 6 7 8 9 10 20 30 40 50 60 70 80 90 100 200 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (Buy) 200.9 200.9 200.9 200.9 2.95 2.95 2.95 2.95 50.7 50.7 50.7 50.7 330.2 330.2 330.2 330.2 5.24 5.24 5.24 5.24 9.3 9.39.3 9.3 9.5 9.59.5 9.5 13.9 13.9 13.9 13.9 10.0 10.0 10.0 10.0 0.82 0.82 0.82 0.82 0.94 0.94 0.94 0.94 s ss s s ss s ssss ssss ssss s ss s s ss s s ss s ssss s ss s e e e e e ee e eeee e e e e e e e e _e_e_e_e e e e e e ee e e ee e eeee p p p p p pp p pppp p p p p p p p p _p_p_p_p p p p p p pp p pppp p p p p

COMPUTER PROGRAMS & S.. 11/11/14

Joyce 11/10/14

Technology

BI 11/13/14

NAS: Health Information Servi

) 0.0 11.0 11.3 88.3 0.0 0.0 CPSI FY 2014 Q3 (Ended 9/30/2014) 53.3 0.84 46.8 0.66 14.0% 27.3%

Printed: 11/13/14 05:11 PM Prepared by: Joyce Using Toolkit 6

Default Override

Projected 5 Year Sales @ 9.5% 0.0 330.2 Less Expenses 22.1% 0.0 -257.2 Less Taxes 35.4% 0.0 -25.8 Less Preferred Dividends $0.0 0.0 0.0 =========== Projected 5 Yr Total Earnings 47.1 Divided by Shares Outs. 11.0 0.0 4.29 Calculated Growth Rate 5.7

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5

4

3

2

TOTAL RETURN ANALYSIS

EVALUATING REWARD and RISK over the next 5 years PRICE, PRICE/EARNINGS RATIO and DIVIDEND ANALYSIS QUALITY ANALYSIS Fiscal Year 6 5 4 3 2 1 A CURRENT YIELD A CURRENT YIELD A CURRENT YIELD A CURRENT YIELD

C % COMPOUND ANNUAL TOTAL RETURN - USING FORECAST HIGH P/E C % COMPOUND ANNUAL TOTAL RETURN - USING FORECAST HIGH P/E C % COMPOUND ANNUAL TOTAL RETURN - USING FORECAST HIGH P/E C % COMPOUND ANNUAL TOTAL RETURN - USING FORECAST HIGH P/E AVERAGE YIELD - USING FORECAST AVERAGE P/E

AVERAGE YIELD - USING FORECAST AVERAGE P/E AVERAGE YIELD - USING FORECAST AVERAGE P/E AVERAGE YIELD - USING FORECAST AVERAGE P/E

D % PROJECTED AVERAGE RETURN - USING FORECAST AVERAGE P/E D % PROJECTED AVERAGE RETURN - USING FORECAST AVERAGE P/E D % PROJECTED AVERAGE RETURN - USING FORECAST AVERAGE P/E D % PROJECTED AVERAGE RETURN - USING FORECAST AVERAGE P/E B AVERAGE YIELD - USING FORECAST HIGH P/E

B AVERAGE YIELD - USING FORECAST HIGH P/E B AVERAGE YIELD - USING FORECAST HIGH P/E B AVERAGE YIELD - USING FORECAST HIGH P/E D REWARD/RISK ANALYSIS (Potential Gain vs. Risk of Loss) D REWARD/RISK ANALYSIS (Potential Gain vs. Risk of Loss)D REWARD/RISK ANALYSIS (Potential Gain vs. Risk of Loss) D REWARD/RISK ANALYSIS (Potential Gain vs. Risk of Loss) C PRICE RANGES

C PRICE RANGESC PRICE RANGES C PRICE RANGES

B FUTURE LOW PRICE ANALYSIS -- NEXT 5 YEARS B FUTURE LOW PRICE ANALYSIS -- NEXT 5 YEARSB FUTURE LOW PRICE ANALYSIS -- NEXT 5 YEARS B FUTURE LOW PRICE ANALYSIS -- NEXT 5 YEARS A FUTURE HIGH PRICE ANALYSIS -- NEXT 5 YEARS A FUTURE HIGH PRICE ANALYSIS -- NEXT 5 YEARSA FUTURE HIGH PRICE ANALYSIS -- NEXT 5 YEARS A FUTURE HIGH PRICE ANALYSIS -- NEXT 5 YEARS

Average Yield % + Annual Appreciation % = Compound Annual Total Return % Average Yield % + Annual Appreciation % = Projected Average Total Return %

Avg. % Payout ÷ Forecast Avg P/E = Avg. Yield Avg. % Payout ÷ Forecast High P/E = Avg. Yield = ÷ Current Price of Stock $

Present Full Year's Dividend $ Present Yield or % Returned on Purchase Price To 1 ) =

- Estimated Low Price Current Price

- Current Price ) ÷ ( (Forecast High Price

= $ Forecast High Price - Estimated Low Price = Range 25% of Range =

MAYBE (Middle 50% of Range) = BUY (Lower 25% of Range) = SELL (Upper 25% of Range) =

to to to

Current Price is in the Range (a) Sel. Low P/E

(b) Average 5-Year Low Price = (c) Recent Severe Low Price =

= $ X Estimated Low Earnings/Share

Selected Estimated Low Price

(d) Price Dividend Will Support = Present Divd. ÷ High Yield = ÷ =

= Forecast High Price $ Selected High P/E X Estimated High Earnings/Share

% High Yield % Payout Dividend EPS UP / DOWN TREND

% ROE (Beginning Yr)

% Debt to Equity % Pre-tax Profit on Sales

B C A

CURRENT PRICE (P/E) 52-WEEK HIGH (P/E) 52-WEEK LOW (P/E)

Low Price High Price

PROJECTED P/E RATIO AVERAGE P/E RATIO

AVERAGE

5

CURRENT P/E RATIO

RELATIVE VALUE PROJ. RELATIVE VALUE AVG TTM + FTM EPS

PEG RATIO TTM EPS FTM EPS YEAR AVG. Company Low P/E High P/E 2004 14.2 0.0 2005 22.0 51.6 0.0 2006 22.2 43.0 0.0 2007 18.4 33.4 0.0 2008 20.6 40.3 0.0 2009 18.9 37.2 0.0 2010 19.4 43.9 0.0 2011 24.2 55.2 0.0 2012 22.9 52.2 0.0 2013 25.2 57.1 0.0 61.74 (19.0) 71.89 (22.1) 56.60 (17.4) 2009 50.1 21.3 1.39 36.1 15.4 1.080 77.9 5.1 2010 49.5 33.9 1.71 29.0 19.8 1.440 84.3 4.2 2011 79.1 41.8 2.34 33.8 17.9 1.440 61.5 3.4 2012 64.0 45.0 2.71 23.6 16.6 1.840 67.9 4.1 2013 62.9 46.1 2.95 21.3 15.6 2.040 69.2 4.4

COMPUTER PROGRAMS & SYSTEMS (CPSI) 11/11/14

22.1 UP 49.1 UP 0.0 EVEN 37.6 26.9 16.4 72.2 22.9 21.6 19.0 83.0% 88.0% 75.4% 79.8% 3.25 17.3 3.58 3.41 1.7 26.9 5.24 141.0 16.4 2.95 48.4 37.6 45.0 2.280 0.051 45.0 48.4 141.0 48.4 92.6 23.1 48.4 71.5 71.5 117.9 117.9 141.0 61.740 Buy 141.0 61.740 61.740 48.4 5.9 2.280 61.740 3.7 % 2.7 18.0 20.6 3.3 12.9 16.3 72.2 21.7 3.3 72.2 26.9 2.7