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Quality Systems Inc

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Despite outpacing the Zacks Consensus Estimate on both the counts in the first quarter, a sluggish global economy, tough competition and a strict regulatory environment are primary headwinds for Quality Systems. Furthermore, downbeat earnings guidance for fiscal 2018 signals at looming concerns. Quality Systems’ solid recurring revenue base is a positive. However, it comes from the lower margin Electronic data interchange (EDI) and RCM services. We are upbeat about the company’s solid performance at the System’s software, hardware and related segments. However massive growth at the segment was offset by lower software license and hardware sales. Quality Systems continues to acquire businesses to enhance its revenue opportunities. The latest deal with EagleDream Health deserves a special mention in this regard. The company has outperformed the broader industry with respect to price over the last one year.

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