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Here's Why You Should Retain Change Healthcare (CHNG) Stock

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Change Healthcare Inc. (CHNG - Free Report) is well-poised for growth backed by strength in artificial intelligence (AI) and machine learning (ML) initiatives and a robust payment accuracy business. However, stiff competition remains a concern.

Shares of the Zacks Rank #3 (Hold) company have lost 16.5% compared with the industry’s decline of 55.1% in a year’s time. Meanwhile, the S&P 500 Index has rallied 19.2%.

Change Healthcare — with a market capitalization of $6.26 billion — is an independent healthcare technology platform offering data and analytics-driven solutions to boost clinical financial and patient engagement outcomes in the United States. It anticipates earnings to improve 13% over the next five years. The company has a trailing four-quarter earnings surprise of 4.7%, on average.

Key Catalysts

Change Healthcare has been utilizing AI and ML to detect inefficiencies and eliminate them from administrative processes in the healthcare system, consequently lowering costs and helping payers, providers and patients with better outcomes.

During the fiscal second quarter of 2022, the company tripled its application programming interface (API)-related transaction volume on a year-over-year basis. Change Healthcare added 118 new products to its marketplace this quarter, thus taking the total to 198 APIs software and hardware products from its portfolio available in the company’s marketplace and other storefronts such as the AWS and Microsoft Azure marketplace. The transaction volume continues to grow, thereby instilling optimism in the stock.

During the fiscal second-quarter 2022 earnings call, the company launched Change Healthcare Stratus Imaging PACS — a new all-inclusive cloud-native solution. This new solution is currently in production with standalone radiology groups with contracts to deploy in hospital-affiliated practices in 2022. The company experienced sustained momentum with its electronic prior authorization offering that utilizes AI and predictive analytics to automate the prior authorization process and facilitates clarity between healthcare constituents to aid the industry in offering the right care at the right place and time in a transparent manner.

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With respect to the Payment Accuracy business, the company is committed to healthcare plans and payers generating double-digit growth. The company’s end-to-end solution helps drive accuracy early in the payment cycle, thus lowering administrative costs and reducing friction.

Per the fiscal second-quarter 2022 earnings call, Change Healthcare shifted a premier payer customers’ primary editing over to its cloud solution and is currently integrating the primary editing with its complementary capabilities in secondary editing.

Factor Hurting the Stock

The healthcare information technology (HCIT) solutions, devices, and services market is extremely competitive and rapidly evolving. Consequently, intense competition can weigh on the company’s pricing and margins.

Estimates Trend

The Zacks Consensus Estimate for fiscal third-quarter 2022 revenues is pegged at $852.2 million, suggesting growth of 8.5% from the year-ago reported number. The same for earnings stands at 36 cents, indicating an improvement of 5.9% from the prior-year quarter.

Stocks to Consider

Some better-ranked stocks in the broader medical space include AMN Healthcare Services, Inc. (AMN - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and Laboratory Corporation of America Holdings (LH - Free Report) .

AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 19.5%. The company currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. The company’s earnings yield of 5.5% compares favorably with the industry’s 0.8%.

Henry Schein beat earnings estimates in each of the trailing four quarters, the average surprise being 21.9%. The company currently carries a Zacks Rank #2 (Buy).

Henry Schein’s long-term earnings growth rate is estimated at 11.8%. The company’s earnings yield of 5.9% compares favorably with the industry’s 4.1%.

Laboratory Corporation surpassed earnings estimates in each of the trailing four quarters, the average surprise being 25.7%. The company currently sports a Zacks Rank #1.

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%.