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Change Healthcare Inc. CHNG is well-poised for growth backed by strategic deals and a robust payment accuracy business. However, stiff competition remains a concern.
The stock has soared 95.1% against the industry’s decline of 0.4% in a year’s time. Also, the S&P 500 Index has rallied 43.3% in the same time frame.
Change Healthcare — with a market capitalization of $7.01 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 30.4%, 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 extremely competitive and rapidly evolving. Consequently, intense competition can put pressure on the company’s pricing and margins.
Change Healthcare has been implementing growth initiatives and integrating innovation across its platform.
During third-quarter fiscal 2021, the company completed the divestiture of its Capacity Management business for $67.5 million. The sale, which is in sync with Change Healthcare’s strategy, will enable the company to focus on the key areas of its business that can deliver the best possible outcomes for customers through the strength of its platform.
Further, during the same quarter, Change Healthcare entered into an agreement with Carnegie Mellon University’s Delphi Research Group for the launch of Delphi's improved COVIDcast real-time COVID-19 indicators. COVIDcast is taking an additional step by adding de-identified COVID-19 claims from Change Healthcare to its unique combination of survey, testing and mobility data.
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.
Additionally, with respect to Payment Accuracy business, the company is committed toward healthcare plans and payers generating double-digit growth for the same. The company’s end-to-end solution helps drive accuracy early in the payment cycle, thus lowering administrative costs and reducing friction.
In first-quarter fiscal 2021 earnings call, management stated that with respect to Payment Accuracy business, Change Healthcare signed multi-million dollar deals, expanding relationships with several of the largest managed care companies in the United States.
For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $3.08 billion, indicating a decline of 6.8% from the year-ago period. The same for adjusted earnings per share stands at $1.28, suggesting a slump of 17.4% from the prior-year reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space are HCA Healthcare, Inc. HCA, DaVita Inc. DVA and Amedisys, Inc. AMED, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
HCA Healthcare’s long-term earnings growth rate is expected at 12.3%.
DaVita’s long-term earnings growth rate is estimated at 14.4%.
Amedisys’ long-term earnings growth rate is estimated at 12%.
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