NextGen Healthcare, Inc. is well-poised for growth, courtesy of its solid product portfolio. The optimism led by solid third-quarter fiscal 2023 performance, along with continued demand for its solutions, is expected to contribute further. NextGen’s dependence on third-party partners and stiff competition pose threats.

Over the past year, this Zacks Rank #3 (Hold) stock has lost 14.2% compared with a 35.4% decline of the industry and 11% fall of the S&P 500.

This renowned global provider of innovative and cloud-based healthcare technology solutions has a market capitalization of $1.11 billion. NextGen projects 13.5% growth for fiscal 2024 and expects to maintain a strong performance. Its earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed the same in the other two, the average surprise being 0.5%.

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Let’s delve deeper.

Solid Product Portfolio: We are optimistic about NextGen’s innovative cloud-based healthcare technology solutions that empower healthcare practices. Its portfolio includes tightly integrated solutions that deliver on ambulatory healthcare imperatives, including consumerism, digitization, risk allocation, regulatory influence and integrated care and health equity.

Solid Demand for NextGen Solutions: We are optimistic about NextGen’s continued benefit from strong demand for its NextGen solutions that include Hospitals, EHR and PM. NextGen’s Inpatient Clinicals, Lab and Patient Portal EHR solutions have also been gaining considerable traction.

Last month, NextGen announced that Compass Health Network had chosen NextGen Behavioral Health Suite to provide whole-person care.

Strong Q3 Results: NextGen’s solid third-quarter fiscal 2023 results, including the year-over-year uptick in the top line, buoy optimism. Strength in Recurring revenues and robust increases in Subscription services, Managed services, and Transactional and data services revenues in the quarter were encouraging. The improvement in Other non-recurring services revenues was also promising. The buyout of TSI Healthcare also looks promising for the stock.

Downsides

Dependence on Third-Party Partners: NextGen is subject to several risks associated with having a portion of its assets and operations located in India and by using third-party service providers in India and other countries. Various factors, such as changes in the current Government of India, could trigger significant changes in India’s economic liberalization and deregulation policies and disrupt business and economic conditions in India generally and NextGen’s business in particular.

Stiff Competition: The markets for healthcare information systems are intensely competitive and NextGen faces significant competition from various sources. Several of its competitors have substantially greater resources, while some of the larger competitors have greater scale than NextGen. Transaction induced pressures or other related factors may result in price erosion or other negative market dynamics that could adversely affect NextGen’s business.

Estimate Trend

NextGen is witnessing a negative estimate revision trend for fiscal 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 2% south to 96 cents.

The Zacks Consensus Estimate for the company’s fourth-quarter fiscal 2023 revenues is pegged at $170.6 million, suggesting a 12.8% improvement from the year-ago quarter’s reported number.

This compares to our fourth-quarter fiscal 2023 revenue estimate of $170.9 million, suggesting a 13% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Hologic, Inc. (HOLX Quick QuoteHOLX - Free Report) , Henry Schein, Inc. (HSIC Quick QuoteHSIC - Free Report) and Avanos Medical, Inc. (AVNS Quick QuoteAVNS - Free Report) .

Hologic, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 15.2%. HOLX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 30.6%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hologic has gained 10.3% against the industry’s 13.8% decline in the past year.

Henry Schein, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 8.1%. HSIC’s earnings surpassed estimates in three of the trailing four quarters and matched the same in the other, the average beat being 2.9%.

Henry Schein has lost 10.1% compared with the industry’s 7.9% decline over the past year.

Avanos, carrying a Zacks Rank #2 at present, has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.

Avanos has lost 13.3% compared with the industry’s 13.8% decline over the past year.