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3 Reasons to Retain NextGen (NXGN) Stock in Your Portfolio

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NextGen Healthcare, Inc. (NXGN - Free Report) is well-poised for growth in the coming quarters, courtesy of its solid product portfolio. A robust first-quarter fiscal 2023 performance, along with solid prospects in the Revenue Cycle Management (RCM) space, is expected to contribute further. NextGen’s operation in a competitive landscape and potential security breaches pose threats.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 15.2% against a 49% decline of the industry and 16.1% fall of the S&P 500.

The renowned global provider of innovative and cloud-based healthcare technology solutions has a market capitalization of $1.16 billion. NextGen projects 9.5% growth for fiscal 2024 and expects to maintain a 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, allowing practices and patients to participate in virtual group visits and invite additional stakeholders to telehealth appointments.

Lucrative Prospects in the RCM Space: NextGen is a major player in the U.S. RCM market, which raises our optimism. NextGen Healthcare has been maintaining its strength among all ambulatory vendors in key RCM areas, which include effective claims processing, patient-facing support performance, the efficiency gained by customers, sustainability of pricing and trust as a business partner. Based on the popularity of the RCM solution, the company plans to expand into dental and hospital markets, which will further drive top-line growth in our view.

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 the robust increase in Subscription services revenues in the quarter are encouraging. Continued strength in the NextGen Office and Enterprise domains and 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, may continue to become more active in the markets through internal development and acquisitions.

Security Breaches: NextGen’s services involve the storage, transmission and processing of clients’ proprietary information and protected health information of patients. If security measures are breached or failed due to third-party action, unauthorized access to client or patient data may be obtained. This could damage NextGen’s reputation and its business. The company could face damages for contract breaches and high costs for remediation in the present and to prevent future occurrences.

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 3.1% south to 95 cents.

The Zacks Consensus Estimate for the company’s second-quarter fiscal 2023 revenues is pegged at $156.5 million, suggesting a 4.8% 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 - Free Report) , ShockWave Medical, Inc. (SWAV - Free Report) and McKesson Corporation (MCK - 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 8.5% compared with the industry’s 39.8% fall in the past year.

ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.

ShockWave Medical has gained 22.2% against the industry’s 36.4% fall over the past year.

McKesson, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10.1%. 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 70.9% against the industry’s 18.8% fall over the past year.

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