Quality Systems (QSII) To Acquire Entrada For $34 Million

Irvine, CA-based Quality Systems, Inc. (NASDAQ:QSII) announced that it has entered into a deal to acquire Entrada, Inc. for $34 million.

Stock Performance

A glimpse of the company’s price trend reveals that the stock had an impressive run on the bourse over the past six months. Quality Systems added 24.74%, comparing favorably with the Zacks classified Medical Info Systems sub-industry’s loss of 1.93%. Also, the current level compares favorably with the S&P 500’s return of 9.66% over the same time frame.

Despite the bullish price trend, estimate revision for the stock has been dismal. The full year saw seven analysts move south over the last one month, with one movement in the opposite direction. As a result, the Zacks Consensus Estimate for the full year dropped 6% to 73 cents over the same time frame. Notably, the stock has Zacks Rank #3 (Hold).

Coming back to the news, the acquisition was to be made by Quality Systems’ wholly owned subsidiary NextGen Healthcare Information Systems unit. Based in Nashville, TN, Entrada is a leading provider of cloud-based solutions for healthcare. Entrada’s mobile app integrates with multiple clinical platforms and all major electronic health records.

Entrada clocked revenues of about $12 million in 2016 and a loss of about $2 million. The transaction is pending customary closing conditions.

Quality Systems is a developer and marketer of healthcare information systems. Going forward, we are upbeat about the performance of Quality System’s total software, hardware and related segments. However, the growth was partially offset by lower software license and hardware sales. Quality Systems continues to focus on growing its presence in the Revenue Cycle Management (RCM), population health and interoperability solution markets.

However, a sluggish global economy, increasing competition and a strict regulatory environment are the primary headwinds. Furthermore, although a recurring revenue stream is a positive for Quality Systems, it mostly comes from the lower margin Electronic data interchange (EDI) and RCM services.

Key Picks

Better-ranked stocks in the broader medical sector include Inogen Inc. (NASDAQ:INGN) , Hologic, Inc. (NASDAQ:HOLX) and Sunshine Heart Inc (NASDAQ:SSH) . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Inogen has a long-term expected earnings growth rate of 17.50%. The stock registered an impressive one-year return of 64.2%.

Hologic has a long-term expected earnings growth rate of 11.33%. The stock has a stellar one-year return of roughly 21.3%.

Sunshine Heart posted a positive earnings surprise of 58.24% in the last reported quarter. The stock has a stellar EPS growth record (last 3–5 years of actual earnings) of almost 22%.

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