Why Greenway Medical Technologies' Shares Dipped Temporarily
Nov 2nd 2012 5:02PM
Updated Nov 2nd 2012 5:08PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of cloud-based health-care management services company Greenway Medical Technologies (NYS: GWAY) dove as much as 15% before recovering more than half of its losses, after reporting its first-quarter earnings results.
So what: For the quarter, Greenway recorded 28% year-over-year revenue growth to $32.8 million, as well as a 262 basis point gross margin expansion, to 54.4%. While revenue squeaked past Wall Street's consensus, the company's breakeven EPS fell $0.02 shy of what analysts had been expecting.
Now what: Yes, Greenway is an expensive IT health-care provider at 36 times forward earnings, but there are a few key points worth noting. First, the company's application platform is based on recurring revenue; so, once it becomes healthfully profitable, remaining profitable shouldn't be too difficult. Secondly, it's begun landing major partners, as evidenced by its electronic health records deal recently signed with Walgreen (NYS: WAG) . Lastly, the company's gross margin is heading in the correct direction, which isn't often the case with rapidly expanding IT-based solution providers. Overall, I think you can look at today's dips as a possible long-term buying opportunity.
Craving more input? Start by adding Greenway Medical Technologies to your free and personalized Watchlist, so you can keep up on the latest news with the company.
The article Why Greenway Medical Technologies' Shares Dipped Temporarily originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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