Should I buy shares in FTSE AIM incumbent Emis Group (LSE:EMIS) for my holdings?
IT healthcare business
Emis provides healthcare-related software services for general practice (GP) surgeries around the UK. One of its key products is Patient Access, which is a platform offered to patients to book appointments as well as request prescriptions and access general medical information. It also played a role in supporting the NHS during the pandemic using its Outcomes4Health platform to support the vaccination rollout.
As I write, Emis shares are trading for 1,258p. At this time last year, the shares were trading for 1,122p, which is a 12% return over a 12-month period.
Should I buy this FTSE stock?
FOR: I always look at a stock’s performance track record. I do understand that past performance is not a guarantee of the future, however. Looking back, I can see Emis has consistently performed well in terms of revenue and profit for the past four years. Coming up to date, it released a post-close trading update at the end of last month. Emis reported growth compared to 2020 levels and confirmed a couple of new acquisitions. It also mentioned its healthy cash balance and a generally robust balance sheet. Full results will be due next month.
AGAINST: Emis shares look a bit expensive at current levels. They are trading at a price-to-earnings ratio of close to 28. This tells me that growth could already be priced in. Furthermore, any negative news or a drop in performance could send the share price on a downward trajectory.
FOR: Emis operates in a market whereby the products it sells aren’t the type to be replaced regularly and there is a high likelihood of repeat custom. I call these “sticky” software solutions and these are embedded into a GP’s infrastructure. This could help boost performance and growth. Emis also pays a dividend with a yield of 2.5%. This is higher than the FTSE AIM and FTSE 250 averages. I do understand dividends can be cut or cancelled, however.
AGAINST: The healthcare software market is extremely competitive. There are many players vying for market dominance. I also believe the recent pandemic has exacerbated the need for cutting-edge software to help healthcare providers operationally and provide patients with technological solutions to help complete day-to-day tasks. Emis could see its market share affected, which could then affect performance and any returns.
My verdict
There is a lot to like about Emis in my opinion. It has a long history and good track record of performance as well as the fact it pays a dividend to help me make a passive income. It has a good footprint in the UK and is growing via acquisitions and organically too.
I would add Emis shares to my holdings. I believe it is one of the best stocks for me to buy on the FTSE AIM index currently and I am keen to see full-year results next month.
