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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 records (EHR). However, stiff competition remains a concern.

Shares of this Zacks Rank #3 (Hold) company have lost 1.8% compared with the industry’s decline of 38.2% 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 $1.22 billion — 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 of 16%, on average.

Key Catalysts

NextGen continues to benefit from strong demand for its solutions.

In November, Eye Center South started utilizing NextGen Mobile to improve practice efficiency and bolster patient volume and access. In October, Community Health Center of Snohomish County (CHC of Snohomish County), a federally qualified health center (FQHC) in Washington state, adopted the company’s full solution suite including NextGen Enterprise EHR and NextGen Enterprise PM as well as NextGen Population Health and NextGen Patient Experience Platform.

In the same month, NextGen’s client Mednax, Inc. expanded its use of NextGen’s integrated platform. Mednax has adopted NextGen Virtual Visits to see and treat patients remotely and NextGen Mobile, which allows its providers to access schedules and records, streamline clinical documentation and collaborate with other care team members all from a smartphone.

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Strong prospects in EHR remain a tailwind. For instance, in October, the company collaborated with Validic to incorporate real-time remote patient monitoring (RPM) into its NextGen Virtual Visits telehealth solution. NextGen Virtual Visits are seamlessly integrated into NextGen Enterprise EHR.

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.

Factor Hurting the Stock

The healthcare information technology (HCIT) market is highly competitive. The industry is also exceedingly fragmented and includes numerous players. We harbor doubts regarding the company’s ability to penetrate the EHR market where it faces competition from low-priced cloud-based EHR models.

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 95 cents.

The Zacks Consensus Estimate for fiscal third-quarter 2022 revenues is pegged at $146.1 million, suggesting growth of 3.1% from the year-ago reported number.

Stocks to Consider

Some better-ranked stocks in the broader medical space include Thermo Fisher Scientific Inc. (TMO - Free Report) , McKesson Corporation (MCK - Free Report) and Laboratory Corporation of America Holdings (LH - Free Report) .

Thermo Fisher surpassed earnings estimates in each of the trailing four quarters, the average surprise being 9.02%. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher’s long-term earnings growth rate is estimated at 14%. The company’s earnings yield of 3.7% compares favorably with the industry’s (3.6%).

McKesson beat earnings estimates in each of the trailing four quarters, the average surprise being 19.9%. The company currently carries a Zacks Rank #2.

McKesson’s long-term earnings growth rate is estimated at 8.9%. The company’s earnings yield of 9.9% compares favorably with the industry’s 3.2%.

Laboratory Corporation surpassed earnings estimates in each of the trailing four quarters, the average surprise being 25.7%. The company currently carries a Zacks Rank #2.

Laboratory Corporation’s long-term earnings growth rate is estimated at 10.6%. The company’s earnings yield of 9.4% compares favorably with the industry’s 3.4%.