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Here's Why You Should Retain NextGen Healthcare (NXGN) Stock

Zacks Equity Research

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 gained 6.7%, outperforming the industry’s growth of 6.2% in a year’s time. The stock also outpaced the S&P 500 Index’s rally of 0.9%.



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. It is expected to witness a CAGR of 12.0% during the period.

Given the popularity of the RCM solution, the company intends to expand into dental and hospital markets that will boost top-line growth.

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, with a CAGR of 5.7%. Further, reports indicate that MedTech companies with solid exposure to big data automated EHRs will excel with respect to operations and margins.

Apart from RCM, NextGen 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 revenue growth. Moreover, recurring revenue stream and growing base of physicians, dentists and hospitals are other major tailwinds.

What’s Deterring the Stock?

The company faces intense competition owing 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 it might persist in the near term as well.

Which Way Are Estimates Headed?

For fiscal 2019, the Zacks Consensus Estimate for revenues is pegged at $552.7 million, indicating an improvement of 4.5% from the year-ago period. The same for earnings stands at 90 cents per share, suggesting growth of 4.7% from the year-ago reported figure.

Key Picks

Some better-ranked stocks from the broader medical space are Cardiovascular Systems, Inc. CSII, Quidel Corporation QDEL and Heamonetics Corporation HAE, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardiovascular Systems has earnings growth rate for fiscal fourth quarter of 2019 of 33.3%.

Quidel Corporation has a long-term earnings growth rate of 25%.

Heamonetics has a long-term earnings growth rate 13.5%.

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