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Analyst Blog

Leading provider of network-enabled services and mobile applications for healthcare providers athenahealth Inc. (ATHN - Free Report) announced that it has been added to Boston Globe’s 2016 list of "Top Places to Work". The Boston Globe is an American daily newspaper based in Boston, MA.

The Boston Globe's "Top Places to Work" list focuses on identifying the most progressive companies in Massachusetts. It is based on more than 70,000 employee opinions on direction, execution, connection, management, work, pay, and benefits. athenahealth is ranked #23 within the largest-sized companies category. The company was included in the list owing to its focus on creating a positive work environment to attract and retain employees through a combination of employee satisfaction, working conditions, and company culture.

We believe that an impressive product portfolio and a growing physician base continue to serve as the key positives for athenahealth. On the other hand, lack of enterprise-sized deals, winding up of government-funded stimulus and increasing competition pose as major headwinds.

The unique business model of athenahealth makes it a strong provider of Revenue Cycle Management (RCM) services to small physician practices. The Software as a Service (SaaS) based approach allows for a lower-cost and more flexible delivery mechanism that is expected to help athenahealth win deals.

In our opinion, athenahealth will continue to benefit from its extensive athenaCollector client base. Its EHR product is a key player in the ambulatory billing market. The company’s updated knowledge base gives its customers real time information that no other competitor has replicated exactly. In addition, the Epocrates acquisition is likely to enhance athenahealth’s user network.

On the macro level, the HITECH Act, which has authorized the EHR Incentive program or the Meaningful Use program, presents significant opportunities for EHR vendors like athenahealth.

However, as the government-sponsored EHR program winds down over the next few years, it will pose a significant problem for athenahealth. The company also lacks adequate alignment with hospitals, which prevents it from getting enterprise-sized deals.

We feel athenahealth’s long-term goal of 30% top-line growth is challenging, given the consolidation trend among small physician practices.

Zacks Rank & Key Picks

Currently, athenahealth carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader medical sector are HMS Holdings Corp. (HMSY - Free Report) , Medidata Solutions Inc. (MDSO - Free Report) and IDEXX Laboratories, Inc. (IDXX - Free Report) . Notably, HMS Holdings and Medidata Solutions carry a Zacks Rank #2 while IDEXX Laboratories sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

HMS Holdings Corp has a long-term expected growth rate of 14.26%. Notably, the company has a solid one-year return of roughly 58%.

Medidata Solutions has a strong one-year return of roughly 19.24%. The stock represents a long-term expected growth rate of 22.33%.

IDEXX Laboratories represents a solid one-year return of almost 71.07%. The company has a long-term expected growth rate of almost 14.96%.

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