A physician writing illegibly on a prescription pad and a nurse making notations in a paper chart are images that have become so familiar that we may not realize what they symbolize: an industry that has been woefully slow to adopt technology.

In today’s automated, digitized world, health care stands out as one of the last holdouts of paper-based records. But that is changing rapidly as more and more physician practices adopt electronic medical record technologies like those made by Quality Systems Inc. (Nasdaq:QSII).

Quality Systems of Irvine, Calif. makes technology for doctor and dentist offices to electronically manage patient records, as well as their overall practices. The growth the company has seen in recent years indicates just how pent up demand for this kind of product has been. Revenue grew to $186.5 million in fiscal 2008, from $157.2 million in 2007 and $119.3 million in 2006. Net income has come close to doubling over that same time frame, totaling $40.1 million in 2008, up from $33.2 million in 2007 and $23.3 million in 2006.

In April, JMP Securities analyst Constantine Davides initiated coverage of the company’s stock with an “outperform” rating, and has since then increased his price target to $38 from $35, noting that, in a crowded field of players trying to enter this nascent industry, Quality Systems had earned a reputation for a solid product.

Such a target would put Quality Systems shares above their closing price Wednesday of $31.25, but well off a 52-week high of more than $45. This stock has been volatile, swinging between $26.08 and $45.35 over the past year, but showing little sustained change since Jan. 1. In fact, after falling 4.5% Tuesday on news that its CEO Lou Silverman was resigning for undisclosed reasons, Quality Systems was on Tuesday slightly below the $30.95 level where it started the year.

In a recent research note, JMP Securities’ Davides wrote that he expects Quality Systems “to continue to capture market share among mid- and large-sized . . .

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