NextGen Healthcare, Inc. is well-poised for growth in the coming quarters, backed by its solid product portfolio. A robust first-quarter fiscal 2023 performance, along with sustained demand for its solutions over the past few months, is expected to contribute further. NextGen’s operation in a competitive landscape and dependence on third-party partners pose threats.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 15.5% against a 44.3% fall of the industry and 6.8% decline of the S&P 500.

This renowned global provider of innovative and cloud-based healthcare technology solutions has a market capitalization of $1.19 billion. NextGen projects 7.3% growth for fiscal 2024 and expects to maintain its strong performance. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in the other, the average surprise being 10.5%.

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Let’s delve deeper.

Solid Product Portfolio: We are optimistic about NextGen’s innovative cloud-based healthcare technology solutions that empower healthcare practices. Its portfolio includes tightly integrated solutions that deliver on ambulatory healthcare imperatives, including consumerism, digitization, risk allocation, regulatory influence and integrated care and health equity.

In August, NextGen announced the addition of increased functionality to NextGen Virtual Visits, thereby allowing practices and patients to participate in group virtual visits and invite additional stakeholders to telehealth appointments.

Demand for NextGen Solutions: NextGen is a major player in the U.S. Revenue Cycle Management (RCM) market, which raises our optimism. Apart from RCM, NextGen will continue to benefit from strong demand for its other NextGen solutions, including Hospitals, electronic health record (EHR) and practice management. NextGen’s Inpatient Clinicals, Lab and Patient Portal EHR solutions have also been gaining considerable traction.

In July, NextGen announced that it had expanded its long-term relationship with InstaMed, a J.P. Morgan company. The deal is aimed at modernizing payment processing via NextGen Pay powered by InstaMed.

Strong Q1 Results: NextGen’s solid first-quarter fiscal 2023 results, along with the year-over-year uptick in the top line, buoy optimism. Strength in Recurring revenues and robust increase in Subscription services revenues in the quarter are encouraging. Continued strength in the NextGen Office and Enterprise domains as well as a host of surround solutions, such as mobile and telehealth, augurs well.

Downsides

Stiff Competition: The markets for healthcare information systems are intensely competitive, and NextGen faces significant competition from various sources. Several of its competitors have substantially greater resources. Some of the larger competitors, having greater scale than NextGen, have and may continue to become more active in the markets both through internal development and acquisitions.

Dependence on Third-Party Partners: NextGen is subject to several risks associated with having a portion of its assets and operations located in India and using third-party service providers in India and other countries. While many U.S. companies have benefited from many policies of the government of India and governments of the states in which they operate, there is no assurance that such policies will continue.

Estimate Trend

NextGen is witnessing a negative estimate revision trend for fiscal 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 3% south to 96 cents.

The Zacks Consensus Estimate for the company’s second-quarter fiscal 2023 revenues is pegged at $156.7 million, suggesting a 4.9% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN Quick QuoteAMN - Free Report) , Patterson Companies, Inc. (PDCO Quick QuotePDCO - Free Report) and McKesson Corporation (MCK Quick QuoteMCK - Free Report) .

AMN Healthcare, flaunting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 3.2%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 15.7%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has lost 5.1% compared with the industry’s 31.6% fall in the past year.

Patterson Companies, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 7.9%. PDCO’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%.

Patterson Companies has gained 0.1% against the industry’s 7.5% fall over the past year.

McKesson, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 9.9%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average beat being 13%.

McKesson has gained 83.4% against the industry’s 7.5% fall over the past year.