Overlooked Small Cap Health Care Stocks: HealthStream (HSTM), Mediware Information Systems (MEDW) and Computer Programs & Systems (CPSI)

Despite the looming uncertainty of Obamacare, health care is a hot industry thanks to an aging population while HealthStream (NASDAQ: HSTM), Mediware Information Systems (NASDAQ: MEDW) and Computer Programs & Systems (NASDAQ: CPSI) are three small cap health care stocks that you have probably not heard of but should be taking a closer look at for one good reason: All have produced solid returns for investors over the past five years. So which of these small cap health care stocks should you be buying? Here is a closer look at all three to help you decide:

HealthStream (NASDAQ: HSTM)

HealthStream provides Internet-based learning and research solutions for healthcare organizations. On Wednesday, HealthStream surged 30.05% to $22.55 (HSTM has a 52 week trading range of $6.90 to $23.19 a share) for a market cap of $501 million plus the stock is also up 22% since the start of the year, 188% over the past year and 388% over the past five years. The catalyst for the surge was HealthStream��s announcement that 4Q2011 earnings were up 49% to $1.8 million on revenues of $21.9 million while for the year, net income was up 67% to $6.9 million on revenues of $82.1 million (which were also up 25%). It should be noted that HealthStream had a follow-on public offering back in November that raised approximately $55 million �C giving the company a strong balance sheet with a cash and marketable securities balance of $89.5 million.

Mediware Information Systems (NASDAQ: MEDW)

Mediware Information Systems licenses, implements and supports clinical and performance management information solutions and other services to healthcare facilities. On Wednesday, Mediware Information Systems fell 2.49% to $14.51 (MEDW has a 52 week trading range of $8.25 to $15.2! 5 a shar e) for a market cap of $119 million plus the stock is up 13% since the start of the year, 30.6% over the past year and 44% over the past five years. Recently, Mediware Information Systems reported that revenues for the fiscal second quarter were up 18% to $15.6 million while net income was flat but results last year included a tax benefit. However and in January, Mediware Information Systems Mediware bought most of the assets of Transtem LLC which now gives the company exposure to the adult stem cell business. Hence, the company believes its well positioned for a growth spurt as stem cells is a hot health care area with no dominant player.

Computer Programs & Systems (NASDAQ: CPSI)

Computer Programs & Systems is a healthcare information technology company that designs, develops, markets, installs and supports computerized information technology systems for small and midsize hospitals �C specifically 650 hospitals in 47 states plus Washington DC. On Wednesday, Computer Programs & Systems rose 0.21% to $61.08 (CPSI has a 52 week trading range of $41.80 to $79.06 a share) for a market cap of $670 million and the stock is also up 19.51% since the start of the year, 17% over the past year and 110% over the past five years. Even better, Computer Programs & Systems has dividend of $1.84 for a dividend yield of 3%. Computer Programs & Systems has also recently reported that 2011 revenues rose 13.2% from $153.2 million to $173.5 million while net income for the year rose 37.9% to $25.8 million.

The Bottom Line. Small cap health care stocks HealthStream (HSTM), Mediware Information Systems (MEDW) and Computer Programs & Systems (CPSI) are all looking strong and set to make! higher moves.

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