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Here's Why You Should Hold on to NextGen (NXGN) Stock Now

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NextGen Healthcare, Inc. (NXGN - Free Report) is well-poised for growth backed by strong demand for its solutions and strength in electronic health record (“EHR”). However, stiff competition remains a concern.

Shares of this Zacks Rank #3 (Hold) company have gained 11% against the industry’s decline of 27% in a year’s time. The S&P 500 Index has rallied 29.7% in the same time frame.

NextGen — with a market capitalization of $969.6 million — is a developer and marketer of healthcare information systems. It anticipates earnings to improve 8.5% over the next five years. The company has a trailing four-quarter earnings surprise 21.9%, on average.

Key Catalysts

NextGen continues to benefit from strong demand for its solutions.

In September, NextGen announced that its Revenue Cycle Management (“RCM”) Services has been successfully optimized by Coastal Orthopedics (Coastal) for its billing and reporting purposes. The RCM Services is an extension of NextGen’s use of the NextGen Enterprise EHR and NextGen Practice Management solutions.

Again, in the same month, the company announced that a federally qualified health center — Neighborhood Health — is utilizing NextGen Mobile to deliver its street medicine program to Nashville’s homeless community. Presently, Neighborhood Health offers care for above 600 homeless individuals living on the streets of Nashville.

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Strong prospects in EHR is another tailwind. For instance, in September, NextGen collaborated with Klamath Tribal Health (“Klamath”) in Oregon in a bid to help in the extensive delivery of COVID-19 vaccinations to its community. By integrating NextGen’s technology with its own EHR workflow, Klamath has been able to inoculate patients in mobile clinics, which has allowed it to administer thousands of vaccines at remote sites since last December.

In August, the company announced that NextGen Enterprise with integrated NextGen Behavioral Health Suite has been selected by Liberty Resources as its core EHR and practice management (“PM”) solution. This collaboration is likely to bolster patient outcomes and offer enhanced care delivery models.

Factor Hurting the Stock

The healthcare information technology (“HCIT”) market is highly competitive. The industry is exceedingly fragmented and includes numerous players. NextGen faces serious competition from players like Cerner Corporation (CERN - Free Report) , which seek to gain market traction through lowering prices or offering services that are differentiated from the former. Consequently, intense competition remains a concern.

Estimates Trend

NextGen has been witnessing an upward estimate revision trend for fiscal 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 1.1% to 93 cents.

The Zacks Consensus Estimate for fiscal second-quarter 2022 revenues is pegged at $143.4 million, suggesting growth of 2.4% from the year-ago reported number.

Stocks to Consider

Some better-ranked stocks from the broader medical space are Henry Schein, Inc. (HSIC - Free Report) and Envista Holdings Corporation (NVST - Free Report) , both currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Henry Schein’s long-term earnings growth rate is estimated at 13.9%.

Envista Holdings’ long-term earnings growth rate is estimated at 27.4%.