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Here's Why You Should Retain NextGen Healthcare Stock Now
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NextGen Healthcare, Inc. is well poised for growth backed by improving 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.
Shares of NextGen Healthcare have lost 34.5%, compared with the industry’s decline of 5.1% on a year-to-date basis. Meanwhile, the S&P 500 Index has fallen 12.4% in the same timeframe.
The company, with a market capitalization of $692.5 million, is a developer and marketer of healthcare information systems. It anticipates earnings to improve 6% over the next five years. Moreover, it has beat estimates in the trailing four quarters by 2.2%, on average.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
The company operates in the intensely competitive healthcare information technology (HCIT) market, which in turn results in increased pricing pressure.
Further, the company has been witnessing margin pressure for a considerable period of time and the trend is likely to persist in the near term.
In fact, the gross margin in the fiscal third quarter was 50.5%, down 240 bps. Moreover, adjusted operating margin, as a percentage of revenues, was 2.4%, down 230 bps.
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 witnessing a CAGR of 12.0%.
Given the popularity of the RCM solution, the company intends to expand into dental and hospital markets. This, in turn, will drive the top line. With EHR services gaining prominence in the U.S. MedTech space, the company is expected to benefit from the growing global EHR market.
According to Transparency Market Research, the global EHR market is estimated to see a CAGR of 5.7% to reach $38.29 billion by 2025. Further, reports indicate that MedTech companies with significant 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. The company’s Inpatient Clinicals, Lab and Patient Portal EHR solutions have also been gaining traction.
Strength in the company’s NextGen division is driving revenues. Moreover, recurring revenue stream and growing base of physicians, dentists and hospitals are other tailwinds.
Which Way Are Estimates Headed?
For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $543.1 million. The same for earnings stands at 82 cents per share, suggesting a decline of 4.7% from the year-ago reported figure.
ResMed has an estimated long-term earnings growth rate of 14.4%.
Merit Medical has an estimated long-term earnings growth rate of 12.1%.
DexCom has a projected long-term earnings growth rate of 36.7%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Here's Why You Should Retain NextGen Healthcare Stock Now
NextGen Healthcare, Inc. is well poised for growth backed by improving 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.
Shares of NextGen Healthcare have lost 34.5%, compared with the industry’s decline of 5.1% on a year-to-date basis. Meanwhile, the S&P 500 Index has fallen 12.4% in the same timeframe.
The company, with a market capitalization of $692.5 million, is a developer and marketer of healthcare information systems. It anticipates earnings to improve 6% over the next five years. Moreover, it has beat estimates in the trailing four quarters by 2.2%, on average.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
The company operates in the intensely competitive healthcare information technology (HCIT) market, which in turn results in increased pricing pressure.
Further, the company has been witnessing margin pressure for a considerable period of time and the trend is likely to persist in the near term.
In fact, the gross margin in the fiscal third quarter was 50.5%, down 240 bps. Moreover, adjusted operating margin, as a percentage of revenues, was 2.4%, down 230 bps.
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 witnessing a CAGR of 12.0%.
Given the popularity of the RCM solution, the company intends to expand into dental and hospital markets. This, in turn, will drive the top line.
With EHR services gaining prominence in the U.S. MedTech space, the company is expected to benefit from the growing global EHR market.
According to Transparency Market Research, the global EHR market is estimated to see a CAGR of 5.7% to reach $38.29 billion by 2025. Further, reports indicate that MedTech companies with significant 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. The company’s Inpatient Clinicals, Lab and Patient Portal EHR solutions have also been gaining traction.
Strength in the company’s NextGen division is driving revenues. Moreover, recurring revenue stream and growing base of physicians, dentists and hospitals are other tailwinds.
Which Way Are Estimates Headed?
For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $543.1 million. The same for earnings stands at 82 cents per share, suggesting a decline of 4.7% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space include ResMed Inc. (RMD - Free Report) , Merit Medical Systems, Inc. (MMSI - Free Report) and DexCom, Inc. (DXCM - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ResMed has an estimated long-term earnings growth rate of 14.4%.
Merit Medical has an estimated long-term earnings growth rate of 12.1%.
DexCom has a projected long-term earnings growth rate of 36.7%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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