This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

February 19, 2009 - Quality Systems, Inc. (QSII-NASDAQ) engages in the development and marketing of healthcare information systems in the United States. Its system automates various aspects of medical and dental practices, and networks of practices, such as physician hospital organizations and management service organizations, ambulatory care centers, community health centers, and medical and dental schools.

It also offers NextGen Express designed for small practices and NextGen Community Health Solution; and revenue cycle management services under the Practice Solutions name, which include billing and collections services for medical practices. In addition, Quality Systems provides hardware and software installation, maintenance and support services, system training, and electronic data interchange services. The company was founded in 1974 and is headquartered in Irvine, California.

This stock defied the rest of the market over the last 3 years and held onto its higher ground. It moved up sharply between 2002 (low of $1.63) and early 2006 (peaking at $45.97). Then it took a fall to $26.30, only to trade between that low and a high of $47.94, achieved in 2008. Now it's around $39 a share, even though the market is retesting its old lows set in November. This one is an investors' favorite.

It seems to have anticipated what the new president wants: more digitized medical records. When there is new money to expand that effort, look for Quality Systems' name to be mentioned as a recipient. It's already making much of the software that would make the idea a reality. The new stimulus plan has an allocation of $19 billion to accelerate the adoption of health care information technology.

Here's what the company had to say about the president's plan: "We applaud the foresight and commitment of our nation's leaders," says Patrick Cline, president of NextGen Healthcare (a subsidiary of Quality Systems). "Increased adoption of information technology will help address many of the problems plaguing the healthcare industry, and we look forward to playing a role in this new effort aimed at reducing healthcare costs and enhancing patient care."

The Economic Reinvestment and Recovery Act earmarks $2-3 billion for construction of HIT (Health Information Technology) infrastructure and about $17 billion in Medicare/Medicaid incentives payable to physicians and hospitals that can demonstrate "meaningful" use of certified HIT, particularly electronic health records (EHR). Practices and organizations that do so by 2011 are eligible to receive a $15,000 bonus from the government, with decreasing amounts available during the ensuing three years.

Featuring specialty specific content and powerful disease management capabilities, NextGen Healthcare also provides organizations with a health outcomes data solution needed to meet the government's proposed stimulus incentive (pay-for-performance) requirements.

While NextGen isnt' the only provider capable of helping institutions with their HIT, it is a recognized leader. Expect some of the new economic stimulus to find its way to NextGen. How much is the only question. On February 2, Piper Jaffray raised its recommendation on the stock from Neutral to a Buy.

Some numbers: There is no debt on the books. Earnings for the March quarter are estimated at 47 cents a share, up from 41 cents a share last year in the same quarter. For the June quarter, estimates are again for 47 cents a share, up from 40 cents in the June quarter of 2008. For the full year, look for $1.71, an increase from $1.44 of 2008. Then in 2010, anticipate $2.03.

Price to sales is 4.83 while Price to Book is 7.40. Operating margin for the last 12 months was 30.74% and the Profit margin was 19.93%. Return on Equity was 34.68%. Cash per share is $2.04. Current ratio is 2.16. Book Value is $5.31. There are 28.37 million shares outstanding with a float of 18.43 million. Insiders own 34.69% of the stock. There's a dividend of $1.20 for a yield of 3.00%.

With a pristine balance sheet, growing revenues and profits, and seemingly in the sweet spot to benefit from the stimulus plan, Quality Systems seems to have it all. Even if the stimulus plan is slow in distributing funds, doctors and hospitals are already seeing the cost benefit of going digital with their records. Just remember that this stock traded at $25.70 on December 2 of last year. That's only a little over 2 months ago.

Company Web site: www.qsii.com

- Ted Allrich