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Here's Why You Should Dump Quality Systems (QSII) Stock Now
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On Jul 4, we issued an updated research report on Irvine, CA-based Quality Systems Inc – a developer and marketer of healthcare information systems. The company currently has a Zacks Rank #4 (Sell).
We believe an unfavorable product mix, global economic weakness, intensifying competition and growing integration risk due to frequent acquisitions are major concerns that might dent the company’s top line. Despite posting a stellar fourth quarter of fiscal 2017, a strict regulatory environment is a major headwind for Quality Systems at the moment.
Quality Systems leverages on its recurring revenue base which mostly comes from lower margin Electronic data interchange (EDI) and RCM services. Added to this, higher research & development as well selling, general & administrative expenses (increasing headcount, higher marketing expenses) are expected to hurt profits over the long term.
The healthcare information systems and services market is highly competitive. Also, the industry is exceedingly fragmented and includes a number of players. The company competes with a number of players such as Epic Systems, Allscripts Healthcare Solutions and athenahealth, among others. In this regard, we harbor doubts regarding the company’s ability to penetrate in the Electronic Health Record (EHR) market where it faces competition from lower-priced, cloud-based EHR models.
In the last reported quarter, Quality Systems witnessed a 10.3% drop in software license and hardware sales in the quarter. In fact, professional services revenues declined 26.6% to $6.8 million. Per management, the decline in revenues at the segment was primarily because of a tough comparison with the year-earlier quarter and unimpressive performance by the new software platform in recent quarters.
The company’s estimate revision trend for the current year has been dismal. In the past 60 days, eight analysts moved south, with no movement in the opposite direction. The magnitude of estimate revision declined around 19.7% to 61 cents per share over the same time frame.
A glimpse at the price movement reveals that Quality Systems has had an unimpressive run on the bourse over the last six months. The company has gained roughly 25.8%, higher than the Zacks categorized Medical Info Systems sub-industry’s addition of just 30%. Moreover, the current level compares favorably with the S&P 500’s return of 9.1% over the same time frame.
Inogen has a long-term expected earnings growth rate of 17.50%. Notably, the stock represents an impressive one-year return of 83.8%.
Mesa Laboratories has a positive earnings surprise of 2.84% over the last four quarters. Notably, the stock represents an impressive one-year return of 18%.
Edap Tms represents a positive one-year return of 1.2% for the last three months. The company provided a solid earnings surprise of 533.3% in the last reported quarter.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>
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Here's Why You Should Dump Quality Systems (QSII) Stock Now
On Jul 4, we issued an updated research report on Irvine, CA-based Quality Systems Inc – a developer and marketer of healthcare information systems. The company currently has a Zacks Rank #4 (Sell).
We believe an unfavorable product mix, global economic weakness, intensifying competition and growing integration risk due to frequent acquisitions are major concerns that might dent the company’s top line. Despite posting a stellar fourth quarter of fiscal 2017, a strict regulatory environment is a major headwind for Quality Systems at the moment.
Quality Systems leverages on its recurring revenue base which mostly comes from lower margin Electronic data interchange (EDI) and RCM services. Added to this, higher research & development as well selling, general & administrative expenses (increasing headcount, higher marketing expenses) are expected to hurt profits over the long term.
The healthcare information systems and services market is highly competitive. Also, the industry is exceedingly fragmented and includes a number of players. The company competes with a number of players such as Epic Systems, Allscripts Healthcare Solutions and athenahealth, among others. In this regard, we harbor doubts regarding the company’s ability to penetrate in the Electronic Health Record (EHR) market where it faces competition from lower-priced, cloud-based EHR models.
In the last reported quarter, Quality Systems witnessed a 10.3% drop in software license and hardware sales in the quarter. In fact, professional services revenues declined 26.6% to $6.8 million. Per management, the decline in revenues at the segment was primarily because of a tough comparison with the year-earlier quarter and unimpressive performance by the new software platform in recent quarters.
The company’s estimate revision trend for the current year has been dismal. In the past 60 days, eight analysts moved south, with no movement in the opposite direction. The magnitude of estimate revision declined around 19.7% to 61 cents per share over the same time frame.
A glimpse at the price movement reveals that Quality Systems has had an unimpressive run on the bourse over the last six months. The company has gained roughly 25.8%, higher than the Zacks categorized Medical Info Systems sub-industry’s addition of just 30%. Moreover, the current level compares favorably with the S&P 500’s return of 9.1% over the same time frame.
Key Picks
A few better-ranked stocks in the broader medical sector are Inogen Inc. (INGN - Free Report) , Mesa Laboratories, Inc. (MLAB - Free Report) and Edap Tms S.a. (EDAP - Free Report) . Notably, all the stocks sport 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%. Notably, the stock represents an impressive one-year return of 83.8%.
Mesa Laboratories has a positive earnings surprise of 2.84% over the last four quarters. Notably, the stock represents an impressive one-year return of 18%.
Edap Tms represents a positive one-year return of 1.2% for the last three months. The company provided a solid earnings surprise of 533.3% in the last reported quarter.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>