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Here's Why You Should Hold NextGen (NXGN) in Your Portfolio Now

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NextGen Healthcare, Inc. (NXGN - Free Report) is well poised for growth on a plethora of product launches, solid trend in electronic health record (EHR) markets and a strong recurring revenue base. However, tough competition has been offsetting the positives.

Shares of NextGen Healthcare have gained 16.2% compared with the industry’s growth of 9.6% in the past three months.

The company, with a market capitalization of $1.05 billion, is a developer and marketer of healthcare information systems. It anticipates earnings improvement of 4% over the next five years. Moreover, it has beaten estimates in each of the trailing four quarters by 50.9%, on average.

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).

Solid Demand for NextGen Solutions:  Through the fiscal second quarter, the company continued to demonstrate strength in its NextGen integrated ambulatory platform.The company plans to further capitalize on the success of its integrated solution by shifting its client base onto its Spring ‘21 release, which leverages on its new patient experience platform.

In August 2020, the company announced that Virginia Cardiovascular Specialists (“VCS”), which is the largest private cardiology practice in Central Virginia, deployed NextGen Virtual Visits to expand the scope of care and treatment offered to patients for non-urgent visits that were disrupted by COVID-19.

Big Data-Based EHR System: Electronic health record (EHR) services in the U.S. MedTech space have been gaining prominence.

In September 2020, the company announced that the next generation of its behavioral health suite is available. This health suite, backed by a renowned EHR and practice management system, is the industry’s only platform that combines comprehensive physical, behavioral and oral health in one software solution.

This is expected to be driving growth in the long term.

Strong Recurring Revenue Base: Strong recurring revenue base has been a key catalyst. In the second quarter of fiscal 2021, total recurring revenues were $125.7 million, up 4.2% from the year-ago quarter driven by an increase of 17% in subscription services and 4% in managed services, offset by a decline of 3% in maintenance and support and flat growth rates at EDI and data services.

However, there is a factor marring growth.

Cutthroat Competition in the HCIT Space: The healthcare information technology (HCIT) market is highly competitive. Also, the industry is exceedingly fragmented and includes numerous players.

Per a research report by Transparency Market Research, leading players in the Global Healthcare Information Systems Market are Cerner Corporation, McKesson and All Scripts. Collectively, these players hold a 26% share of the global market. Thus, competitors seek to gain market traction through lowering prices or offering services that are differentiated from NextGen.

Which Way Are Estimates Headed?

For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $546.3 million, indicating a rise of 1.1% from the prior-year period. The same for earnings stands at 89 cents per share, suggesting a rise of 7.2% from the year-ago reported

Stocks to Consider

Some better-ranked stocks from the broader medical space include Align

Technology (ALGN - Free Report) , DaVita (DVA - Free Report) and Thermo Fisher Scientific

(TMO - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Align Technology has a projected long-term earnings growth rate of 18.3%.

Thermo Fisher has an estimated long-term earnings growth rate of 18%.

DaVita has a projected long-term earnings growth rate of 18.3%.

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