Here's Why You Should Hold on to NextGen Healthcare for Now
NextGen Healthcare, Inc. NXGN is well poised for growth on the back of growing RCM (Revenue Cycle Management) and electronic health record (EHR) markets, and solid demand for other NextGen solutions. However, intense competition in the healthcare information technology market remains a concern.
The stock carries a Zacks Rank #3 (Hold).
Price Performance
Shares of NextGen Healthcare have lost 23.5%, compared with the industry’s decline of 7.3% in a year’s time. Meanwhile, the S&P 500 Index rallied 4.7%.
What’s Deterring the Stock?
The company faces intense competition thanks to the highly competitive healthcare information technology (HCIT) market it operates in. This in turn will aggravate pricing pressure.
Further, the company has been witnessing margin pressure for a considerable period of time and is likely to persist in the near term.
What’s Favoring the Stock?
Being a major player in the U.S. RCM space, the company continues to benefit from this market. The global RCM market is anticipated to reach $73.2 billion by 2026 at a CAGR of 12.0%.
Given the popularity of the RCM solution, the company intends to expand into dental and hospital markets that will boost the top line.
On the basis of the latest trend of EHR services in the U.S. MedTech space gaining prominence, the company is expected to benefit from the growing global EHR market.
According to Transparency Market Research, the global EHR market is estimated to reach $38.29 billion by 2025 at a CAGR of 5.7%. Further, reports indicate that MedTech companies with significant exposure to big data automated EHRs will excel with respect to operations and margins.
Apart from RCM, NextGen Healthcare will continue to benefit from strong demand for its other NextGen solutions that include Hospitals, EHR and practice management. NextGen’s Inpatient Clinicals, Lab and Patient Portal EHR solutions have also been gaining significant traction.
Strength in the company’s NextGen division is significantly bolstering the company’s revenues. Moreover, recurring revenue stream and growing base of physicians, dentists and hospitals are other tailwinds.
Which Way Are Estimates Headed?
For fiscal 2019, the Zacks Consensus Estimate for revenues is pegged at $541.8 million, indicating an improvement of 2.4% from the year-ago period. The same for earnings stands at 85 cents per share, suggesting a decline of 1.2% from the year-ago reported figure.
Key Picks
Some better-ranked stocks from the broader medical space are Nissan Chemical Corporation NNCHY, Straumann Holding AG SAUHF and McKesson Corporation MCK, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Nissan Chemical has a long-term earnings growth rate of 10%.
Straumann Holding has a long-term earnings growth rate of 18%.
McKesson has a long-term earnings growth rate of 6.9%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Straumann Holding AG (SAUHF) : Free Stock Analysis Report
McKesson Corporation (MCK) : Free Stock Analysis Report
NEXTGEN HEALTHCARE, INC (NXGN) : Free Stock Analysis Report
Nissan Chemical Industries, Ltd. (NNCHY) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
