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Piper Jaffray Initiates Coverage on Computer Programs & Systems (CPSI) with an Overweight; More Upside Still Left

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November 24, 2009 7:47 AM EST

Piper Jaffray & Co. initiates coverage on Computer Programs & Systems (Nasdaq: CPSI) with an Overweight. Price target $65.

Piper analyst says, "CPSI is a pure-play hospital EHR vendor focused on the small hospital market. Hospitals large and small will each receive a $2 million rebate check from the government upon proof of meaningful use of a certified electronic health record (EHR). The good news for CPSI is that a $2 million check is real money to a 100 bed hospital, CPSI's sweet spot. In addition, most 100 bed hospitals have no I/T in place. CPSI's core market is the least penetrated and has the greatest incentive to adopt. This puts CPSI in the right place at the right time, with a low-cost offering targeted at the small to mid-sized community hospital market."

"Yes, we're late to the party, with the stock up 70% YTD, but we believe there is more upside left, driven by stimulus-related acceleration of earnings and multiple expansion. We like how the Company has invested this year to expand implementation capacity, which we believe will deliver upside to 2011 estimates...We expect the stimulus-driven bookings to reflect in the company's backlog in 2010 as more clarity on criteria such as meaningful use definition and certification requirements clear up. The company's discussion around its pipeline and backlog in the next couple of quarters should provide an indication of stimulus activity and win rate, and act as catalysts on the stock."

To see all the upgrades/downgrades on shares of CPSI, visit our Analyst Ratings page.

Computer Programs and Systems, Inc. (CPSI) is a healthcare information technology company that designs, develops, markets, installs and supports computerized information technology systems to meet the demands of small and midsize hospitals.