Health Trends to Boost Firm: Under the Radar

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MOBILE, Ala. (TheStreet) -- Aging baby boomers, health insurance reforms and provisions in the federal stimulus package are stoking growth for companies that specialize in health care technology. Here's a small-cap stock that will benefit from these trends.

Mobile, Ala.-based Computer Programs & Systems(CPSI Quote) designs software that helps hospitals track patient data and financial information. More than 650 medical facilities use the company's applications and that number is expected to skyrocket as institutions modernize their record-keeping processes.

Many companies had to slash staff and other administrative expenses just to post a second-quarter profit. But Computer Programs & Systems boosted its revenue 11% to $31 million while adding 90 employees. Net income rose 18% to $3.5 million, or 32 cents a share.

Computer Systems & Programs has increased sales for four consecutive quarters, a rare feat in a period of economic contraction. The trend is likely to continue. Its quarterly operating margin topped 17% as its net margin climbed above 11%, a sign of improved product demand.

Sales of its computer systems rose 18% to $8.4 million. This product unit generates long-term revenue for the company, which must also service and maintain the equipment and software. Even though it bolstered its workforce and boosted business volume, its expenses shrank 2% to $7.3 million.

Shares of Computer Programs & Systems have advanced 48% this year, doubling the 22% gain of the Russell 2000 Index, a measure of small companies. The stock has price-to-earnings ratio of 26, a premium to the market, but a 53% discount to health care technology peers. Its 3.7% dividend yield is higher than the average for members of the S&P 500 Index.