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Here's Why You Should Retain Change Healthcare (CHNG) Stock

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Zacks Equity Research
·4 min read
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Change Healthcare Inc. CHNG is well poised for growth backed by strategic deals and robust payment accuracy business. However, stiff competition remains a concern.

The stock has gained 24.9%, compared with the industry’s growth of 26.9% in a year’s time. Also, the S&P 500 Index has rallied 18.2% in the same timeframe.

Change Healthcare — with a market capitalization of $5.34 billion — is an independent healthcare technology platform offering data and analytics-driven solutions to boost clinical financial and patient engagement outcomes in the United States. It anticipates earnings to improve 2% over the next five years. Moreover, the company has a trailing four-quarter earnings surprise 29.6%, on average.

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).

Factor Hurting the Stock

The market for healthcare information technology (HCIT) solutions, devices and services is intensely competitive and rapidly evolving. Consequently, intense competition can put pressure on the company’s pricing and margins.

Key Catalysts

Change Healthcare has been implementing growth initiatives and integrating innovation across its platform.

During second-quarter fiscal 2021, the company acquired Nucleus.io to accelerate its cloud-native enterprise imaging efforts, and PROMETHEUS Analytics to improve its value-based care initiatives. With respect to Nucleus.io, the buyout is likely to extend the company’s market opportunity with individual radiologists and radiology practices.



The second acquisition — PROMETHEUS Analytics — enables healthcare payers to optimize their provider networks under value-based care reimbursement models.
Since the company has already integrated the PROMETHEUS Analytics methodology in its HealthQx solution, this buyout is a great instance of its try-before-you-buy acquisition strategy. Moreover, Change Healthcare continues to focus on expansion of its channel strategy by signing two multi-year contracts with Vizient — the largest healthcare purchasing group in the country.

Additionally, with respect to Payment Accuracy business, the company remains committed toward healthcare plans and payers generating double-digit growth for the same. The company’s end-to-end solution helps drive accuracy earlier in the payment cycle, lowering administrative costs and reducing friction.

In July 2020, Change Healthcare introduced its clinical data retrieval service, which is a new cloud-based interoperability solution that helps payers and a broader range of organizations to instantly get the patient care data required in an integrated electronic fashion. This, in turn, will aid in the verification of claim accuracy, paying claims, managing risk profiles, satisfying quality reporting requirements and optimizing interventions.

Estimates Trend

For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $3.05 billion, indicating a decline of 6.5% from the year-ago period. The same for adjusted earnings per share stands at $1.25, suggesting a decline of 19.4% from the prior-year reported figure.

Stocks to Consider

Some better-ranked stocks from the broader medical space are Merit Medical Systems, Inc. MMSI, Align Technology, Inc. ALGN and Thermo Fisher Scientific Inc. TMO, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Merit Medical has a projected long-term earnings growth rate of 12.6%.

Align Technology has an estimated long-term earnings growth rate of 18.3%.

Thermo Fisher has a projected long-term earnings growth rate of 18%.

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Merit Medical Systems, Inc. (MMSI) : Free Stock Analysis Report
 
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Zacks Investment Research