Computer Programs & Systems Shares Popped: What You Need to Know


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 health-care IT company Computer Programs & Systems (NAS: CPSI) climbed more than 15% on Friday after its quarterly results topped Wall Street expectations.

So what: Fueled by a 30% revenue surge, CPSI posted a second-quarter profit of $0.72 per share, versus the average analyst estimate of just $0.55 per share. The shares are hitting new 52-week highs on the market-beating report and have risen more than 75% over the past year, suggesting that Mr. Market expects even better things to come.

Now what: I wouldn't bet on this momentum just yet. While CPSI's short-term certainly looks great (management expects more solid growth in the current quarter), its red-hot stock price and, more importantly, forward P/E of about 30 still make this value hound a little nervous. Of course, with zero debt, solid returns on equity, and earnings expected to grow an average of 18% in each of the next five years, CPSI is certainly worth keeping an eye on.

Interested in more info on CPSI?Add it to your watchlist.

At the time thisarticle was published Fool contributorBrian Pacamparaowns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool'sdisclosure policyalways gets a perfect score.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.