NextGen Healthcare, Inc. (NASDAQ: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 36.7%, compared with the industry’s decline of 12.5% in a year’s time. Meanwhile, the S&P 500 Index rallied 2.3%.
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 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. 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 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 major tailwinds.
Which Way Are Estimates Headed?
For fiscal 2019, the Zacks Consensus Estimate for revenues is pegged at $541.6 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 Baxter International Inc. (NYSE:BAX) , Amedisys, Inc. (NASDAQ:AMED) and CONMED Corporation (NASDAQ:CNMD) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Baxter has a long-term earnings growth rate of 12.8%.
Amedisys has a long-term earnings growth rate of 16.3%.
CONMED has a long-term earnings growth rate 14.9%.
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Baxter International Inc. (BAX): Free Stock Analysis Report
Amedisys, Inc. (AMED): Free Stock Analysis Report
CONMED Corporation (CNMD): Free Stock Analysis Report
NEXTGEN HEALTHCARE, INC (NXGN): Free Stock Analysis Report
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