This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Health-Care Reformer: Under the Radar

Stocks in this article: MEDQTRCRCERN

BOSTON ( TheStreet) -- TheStreet's stock model upgraded MedQuist (MEDQ) to "hold" on Tuesday after the medical-transcription company posted a fourth-quarter profit.

MedQuist is larger than rival Transcend Services (TRCR), which is rated "buy," though the entrance of larger competitors is a concern. Wal-Mart (WMT) began a digitization partnership with eClinicalWorks and Dell (DELL) last year.

Still, MedQuist and Transcend are worth consideration.

MedQuist swung to a fourth-quarter profit of $5.9 million, or 16 cents a share, from a loss of $60 million, or $1.61, a year earlier. The company's operating margin widened from 6.8% to 15%. Its balance sheet contains $25 million of cash, equating to an ample quick ratio of 1.3, and no debt. Still, cash fell 37% from a year earlier. Return on equity, a measure of profitability, climbed to 20%.

MedQuist sells voice-recognition software, translating physicians' words into electronic documents, which are then edited and formatted in its proprietary platform. This process improves workflow productivity by an estimated 50%. MedQuist's suite of products reduces the need for hospitals' technical staff, which raises objections from professionals with self-preservation instincts.

President Barack Obama allocated $20 billion of stimulus money to medical-record digitization, hoping to transform all paper to code by 2014. Companies like Cerner (CERN) capitalized on the stimulus. MedQuist offers the next logical step in the process of overhaul. The company's net cash position, proven platform and growing customer base make it an attractive investment. Philips Electronics was once a majority shareholder, but divested its 70% stake in 2007.

India- and Maryland-based CBay Systems acquired the majority ownership from Philips, but MedQuist continues to operate as a publicly traded entity. Between the two companies, there is a customer base of more than 1,700 hospitals. CBay's other subsidiary, Mirrus Systems, provides medical billing and receivables management. In a country where health care costs are exorbitant, these three firms, which offer tangible savings, are poised to grow.

During the past three years, MedQuist has boosted profit 50% annually, on average. Its stock, however, has fallen 4.4%, on average, over the same period. The poor performance has deterred investors from bidding up the shares. MedQuist stock sells for a price-to-book ratio of 2.9, a price-to-sales ratio of 1.1 and a price-to-cash-flow ratio of 7.4, reflecting 45%, 79% and 76% discounts to industry averages. The stock has jumped 23% this year.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs