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Here is an article from Motley Fool on DHTI. Note that this stock is still
selling for just 7 1/4 and has very explosive earnings growth. This could
be a $20 stock within a few months if all goes well.
Dynamic Healthcare Technologies
Price (4/16/97): $6 1/2
HOW DID IT DOUBLE?
Just a year ago, this provider of healthcare information systems was languishing around $2 a share; the whole company was valued at about $15 million. Now, with nearly three times as many shares outstanding, the stock recently shot up to $8 5/8, for a market cap of $147 million. Dynamic indeed!
The company has made some smart acquisitions that have enhanced its product line and broadened its customer base. Better still, it has convinced investors that the purchases make sense. The shares rocketed to $7 5/8 in May, during last year's growth-stock boom, following the announcement that the company would acquire Dimensional Medicine, a company focused on clinical information systems. After ups and downs throughout the summer and fall, Dynamic scored again with the purchase of Collaborative Medical Systems (Co-Med), which sent the shares from $3 7/8 in November to $6.
On February 3, Dynamic announced fourth quarter earnings of $0.04 per share, up from a break-even quarter in1995. Every revenue stream showed a strong increase, and operating income soared to $413,000, up from $80,000 in the fourth quarter of 1995. Overall, excluding acquisition charges, Dynamic cut its FY96 loss in half, to $0.04 a share.
The acquisitions seemed to make even more sense when, on February 24, Dynamic announced it would allow SUNQUEST INFORMATION SYSTEMS (Nasdaq: SUNQ) exclusive rights to market its CoPath Client/Server anatomic pathology solution to Sunquest's current customer base for an initial $3 million fee (due during the first quarter). A Dynamic enhancement of a widely used Co-Med product, this system is now being used at the University of California, San Francisco Medical Center and The New York Hospital-Cornell Medical Center. The stock rallied to its recent highs on the Sunquest announcement before dropping a bit on an earnings scare elsewhere in the healthcare information industry.
Based in Maitland, Florida, Dynamic designs enterprise-wide healthcare information software systems. These systems consolidate patient information to allow hospitals, physicians groups, and integrated health delivery networks to store and retrieve a patient's clinical, financial, and administrative records. They store information from a variety of media, including paper, x-ray film, magnetic disk, video, and audio recordings, and make it all available online. The result is enhanced productivity, reduced costs, and improved patient care -- just what the doctor ordered.
Dynamic's current product line includes systems used in laboratory, radiology, anatomic pathology, and anesthesiology applications as well as imaging and electronic health record solutions. Revenues come from licensing, integrating, and servicing its software solutions. Dynamic has 550 customers, including major facilities such as the UCLA Medical Center, Memorial Sloan-Kettering Cancer Center, and The Mayo Clinic.
The company issued 4.6 million shares in a secondary offering last fall at $5.75 a share. The Co-Med acquisition led to a fourth quarter charge of $15 million, or $0.96 a share for the fourth quarter and $1.68 a share for the year. In March, the company announced plans to purchase Dynacor, a private firm specializing in laboratory information systems.
12-month sales: $16.57 million
12-month income: ($15.15 million)
12-month EPS: ($0.04)
Profit Margin: N/A
Market Cap: $109.3 million
Cash: $11.3 million
Current Assets: $20 million
Current Liabilities: $10.3 million
Long-term Debt: N/A
HOW COULD YOU HAVE FOUND THIS DOUBLE?
A company with a lousy record of growing revenues issues a bunch of new shares and then makes a costly acquisition. And even after backing out one-time charges, it still loses four cents a share for the year. Seems like it would have been hard to fathom the company's long-term prospects without seeing an analyst's report or simply knowing the industry well enough to understand that Dynamic's moves might make strategic sense. The numbers just didn't tell the story.
WHERE TO FROM HERE?
According to analyst estimates, these shares are hankering for another double -- at the very least. The First Call consensus estimates have Dynamic earning $0.48 per share in the year ending in December 1997, with $0.66 per share expected in FY98. Two analysts have put long-term annual growth at a whopping 45%. Due to FY96 losses, we can't PEG the stock. The company is also too small for a YPEG to be taken that seriously. Even so, a YPEG off the FY97 estimates suggests fair value of $21!
With no debt, a much enhanced product line, a stronger sales force, and the capacity to start leveraging its information systems into some relatively high margins, Dynamic is a totally rejuvenated company poised to take advantage of the major trends in healthcare. That, at least, seems to be the analysts' conclusion.
Given the current estimates and the company's first-class clientele, Dynamic appears to be a relatively undiscovered gem worth a Fool's close attention.
-Louis Corrigan (RgeSeymour)
(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.
Transmitted: 4/22/97 5:03 PM (dd970416)
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