Dynamic Turnaround
How's this for a hot market yarn? A publicly traded healthcare information systems company with a checkered earnings history emerges from bankruptcy and apparently sidesteps a Securities and Exchange Commission investigation. The company changes its name and product strategy and successfully completes a couple of private placements. Its stock is relisted on Nasdaq. Then, the company proceeds to gobble up smaller rivals that gold plate its client list and rejuvenate its product line. It issues more stock. A few quarters later, profits return. To cap it all off, The Motley Fool, the leading on-line investor forum, raves about this "undiscovered gem" and, predictably, the company's stock price skyrockets from the $2-a-share-or-less doldrums of 1995 and 1996 to a high of $8.63 this past spring. Meet Dynamic Healthcare Technologies, a little-known company that has attracted a following lately. Dynamic supplies hospitals with electronic charts and the accompanying software that allow integration of all a patient's records, regardless of the media they are stored in or the hardware platform used by the department that keyed them in. In 1996, the company generated $16.6 million in sales, nearly double the amount of revenue reported in 1995. In the first quarter of this year, Dynamic reported $9.7 million in revenue, thanks in part to acquisitions. The driving force behind this turnaround is Mitchel Laskey. In 1983, he had built and sold his company, Dynamic Control Corp., to Baxter International for about $30 million. In mid-1994, he took over an ailing firm called Terrano Corp., changed its name and discontinued most of its operations. Now Laskey is leading a turnaround that has drawn investor interest - witness The Motley Fool -and has transformed Dynamic Healthcare Technologies into a small "cap" winner on Wall Street. Of course, the story isn't quite over yet. In recent weeks, Dynamic's shares have tumbled from their lofty March highs. Analysts trace the most recent gyrations to comments made by company executives that the sales cycle will be longer than anticipated as the continuing turmoil in the health care industry forces hospitals to delay making IT investments. Analysts remain upbeat about Dynamic's long-term prospects, although two of them did revise their quarterly and yearly per-share earnings estimates downward sharply in early June. Now, Benjamin Rook of Chicago's Vector Securities projects earnings per share of 23 cents at year-end and 35 cents per share by the end of 1998. And Rook also warns further adjustments are possible. Nonetheless, institutional investors have been snapping up shares, with 13 different ones holding about one-third of Dynamic's shares. "They've got a great management team. They're going after such a huge market, and they have testimonials from some heavy-hitting customers" who are "clearly early adopters," says Mark Trebeek, an analyst with First Analysis Corp., a Chicago investment bank. "There's not much risk in this stock's price declining."
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