View of MDRX
In a previous post i mentioned MDRX can do around 0.77 for 2007. After a detailed review of the numbers this may not be possible in a GAAP basis as per expectations.
As for the 3rd quarter…
The quarter was nothing special, hence the initial decline. MDRX grew revenue only about 4% q-to-q, and management basically guided a similar top line growth for the 4rth by stating +225M for 2006. The reason I feel kinda uneasy is because this is a drastic slow down from previous quarters. (Although I do feel management low balled 4rth q expectations, stating in the CC that they expect the high end of estimates to be achieved.)
Don’t get me wrong, I am very bullish on MDRX and feel there is a tremendous amount of growth left… especially when the government is getting involved to push EMRs. Also, I’m seeing over a 60% earnings growth rate for the next 3 years.
As per valuation expectations…
MDRX should be trading on a free cash-flow basis valuation, not a GAAP earnings valutaion metric. The GAAP result does not give its cash-flow justice, and to use it to measure the PE and PEG is unfair, but that is for analsts to decide.
Is MDRX overvalued…
I don’t think it is, as per a GAAP basis and GAAP earnings growth (looking at most 3 yrs out). And when you look at a FCF basis, it is not. (maybe this is why it was being accumulated after 10am on Friday)
I’m interested to see how analysts decide to digest the numbers. Analyst sentiment should be out next week.
