NextGen Healthcare, Inc. is well-poised for growth in the coming quarters, courtesy of its solid product portfolio. The optimism led by solid second-quarter fiscal 2023 performance, along with continued demand for its solutions, is expected to contribute further. NextGen’s dependence on third-party partners and potential security breaches pose threats.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 6.3% against a 67.2% decline of the industry and 20.2% fall of the S&P 500.

This renowned global provider of innovative and cloud-based healthcare technology solutions has a market capitalization of $1.27 billion. NextGen projects 10.2% 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 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.

NextGen, in September, announced the newest release of its NextGen Behavioral Health Suite, which has been built upon its NextGen Enterprise electronic health record (EHR) and practice management (PM) system.

Solid Demand for NextGen Solutions: We are optimistic about NextGen’s continued benefit from strong demand for its NextGen solutions that include Hospitals, EHR and PM. NextGen’s Inpatient Clinicals, Lab and Patient Portal EHR solutions have also been gaining considerable traction.

In November, NextGen announced that NextGen Enterprise had been selected as the EHR and PM solution of choice by Federally Qualified Health Center, Cherry Health.

Strong Q2 Results: NextGen’s solid second-quarter fiscal 2023 results, along with the year-over-year uptick in the top line, buoy optimism. Strength in both revenue sources was impressive. Robust increases in Subscription services, Managed services and Transactional and data services revenues in the quarter were encouraging. The solid improvement in Other non-recurring services revenues is also promising. The expansion in adjusted operating margin bodes well.

Downsides

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 by using third-party service providers in India and other countries. Various factors, such as changes in the current Government of India, could trigger significant changes in India’s economic liberalization and deregulation policies and disrupt business and economic conditions in India generally and NextGen’s business in particular.

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 positive estimate revision trend for fiscal 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 3.2% north to 98 cents.

The Zacks Consensus Estimate for the company’s third-quarter fiscal 2023 revenues is pegged at $160.2 million, suggesting a 6.9% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Exact Sciences Corporation (EXAS Quick QuoteEXAS - Free Report) , ShockWave Medical, Inc. (SWAV Quick QuoteSWAV - Free Report) and Merit Medical Systems, Inc. (MMSI Quick QuoteMMSI - Free Report) .

Exact Sciences, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 27.5%. EXAS’ earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, the average beat being 0.6%.

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

Exact Sciences has lost 36.3% compared with the industry’s 23.4% decline in the past year.

ShockWave Medical, carrying a Zacks Rank #2 at present, has an estimated growth rate of 21.2% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average beat being 146.1%.

ShockWave Medical has gained 14.7% against the industry’s 29.8% decline over the past year.

Merit Medical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.

Merit Medical has gained 10.1% against the industry’s 11.7% decline over the past year.