CERNER CORPORATION (CERN) Cerner is a supplier of health care information technology (HCIT). The company designs, develops, markets, installs, hosts, and supports HCIT, healthcare devices, hardware, and content solutions for healthcare organizations and consumers worldwide.
Key Statistics (As of February 2015) P/E (TTM) 53.5
Since Purchase
Fwd P/E 27.4
CERN
S&P 500
P/S
7.2
P/B
6.7
Dividend Yield
20%
-
Performance Since Purchase (3/03/2014 – 12/31/2014) Cerner (CERN)
8%
S&P 500 (Benchmark)
10%
0%
2014 Performance
-‐20%
Mar-‐14
Apr-‐14
May-‐14
Jun-‐14
Jul-‐14
Aug-‐14
Sep-‐14
Oct-‐14
Nov-‐14
ORIGINAL THESIS
RISK
Health care providers are viewing investment in healthcare information technology as a key strategy to keep up with regulatory requirements, shifting reimbursement structures, and to qualify for government incentives. The Center for Medicare and Medicaid Services estimates that the United States spent $2.9 trillion in the health care sector in 2013. With the passing of the American Recovery and Reinvestment Act (ARRA), a key act that incentives the health care industry to modernize its operations, the healthcare information technology industry has seen strong demand for its products. We expect the health care industry to become extremely technological in the future and Cerner is in a key position to capitalize on this trend.
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University of South Florida Muma College of Business
Cerner (CERN)
17%
S&P 500 (Benchmark)
12%
Dec-‐14
Unforeseen regulatory changes The shifting regulatory environment continually calls for new standards in HCIT data base technologies. Reduction in revenue backlog If Cerner were to lose contracts or fail to expand its customer base, its backlog and estimates of future revenue would decrease. Pricing pressure from competitors The HCIT industry is extremely competitive. Both private and public companies might create pressure for Cerner. Threat of new entrants Large companies such as GE and Microsoft have entered into the HCIT industry and this should not be overlook. Over spending on software Cerner invests heavily in R&D to develop cutting edge solutions as well as meet industry standards. A significant change in regulatory standards for HCIT could hurt Cerner.
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