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Quality Systems Professional Service a Drag, Competition Rife
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On May 23, we issued an updated research report on Irvine, CA-based Quality Systems Inc. , a leading developer and marketer of healthcare information systems.
The stock currently carries a Zacks Rank #4 (Sell).
Quality Systems posted a stellar fourth quarter of fiscal 2017, beating the Zacks Consensus Estimate for both the counts. However, the quarter witnessed a 26.6% year-over-year decline in professional service revenues to $6.8 million. This was primarily because of tough comparisons with the year-earlier quarter and an unimpressive performance by the new software platform in recent quarters.
We are particularly upbeat about the solid performance by the system’s total software, hardware and related segments. However, growth at the segment was partially offset by lower software license and hardware sales.
Of the other notable concerns, a sluggish global economy, intensifying competition and a strict regulatory environment are primary headwinds. Furthermore, although a recurring revenue stream is a positive for Quality Systems, it mostly comes from the lower margin Electronic data interchange (EDI) and RCM services.
Quality Systems continues to acquire businesses that improve its revenue opportunities on one hand and aggravate integration risks on the other. The company’s frequent acquisitions can impact its balance sheet as well as overall organic growth. This may limit Quality Systems’ expansion plans and worsen its risk profile.
On the brighter side, Quality Systems continues to focus on growing its presence in the Revenue Cycle Management (RCM), population health and interoperability solution markets. We believe, steady focus on the Revenue Cycle Management (RCM), population health and interoperability solution markets are expected to drive dividends in the coming quarters.
Share Price
Quality Systems has had an impressive run on the bourse over the last one year.
The company has gained roughly 12.3%, higher than the Zacks categorized Medical instruments sub-industry’s addition of just 1.4%. However, the current level compares unfavorably with the S&P 500’s return of 14.3%.
Estimate Revisions
The estimate revision for the stock has also been unfavorable.
The year has seen one estimate move south over the last two months, compared to no movement in the opposite direction. As a result, full-year estimates fell 2.6% to 74 cents per share over the same time frame.
Key Picks
Better-ranked stocks in the broader medical sector include Luminex Corporation , Edwards Lifesciences Corp. (EW - Free Report) and Inogen Inc (INGN - Free Report) . Notably, Inogen and Luminex sport a Zacks Rank #1 (Strong Buy), while Edwards Lifesciences carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Inogen projects a long-term adjusted earnings growth of almost 17.5%. The stock returned 77.8% over the last one year.
Luminex has an expected long-term adjusted earnings growth of almost 16.3%. The stock added roughly 7.1% over the last three months.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.6%. The stock has a solid one-year return of roughly 13.6%.
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Quality Systems Professional Service a Drag, Competition Rife
On May 23, we issued an updated research report on Irvine, CA-based Quality Systems Inc. , a leading developer and marketer of healthcare information systems.
The stock currently carries a Zacks Rank #4 (Sell).
Quality Systems posted a stellar fourth quarter of fiscal 2017, beating the Zacks Consensus Estimate for both the counts. However, the quarter witnessed a 26.6% year-over-year decline in professional service revenues to $6.8 million. This was primarily because of tough comparisons with the year-earlier quarter and an unimpressive performance by the new software platform in recent quarters.
We are particularly upbeat about the solid performance by the system’s total software, hardware and related segments. However, growth at the segment was partially offset by lower software license and hardware sales.
Of the other notable concerns, a sluggish global economy, intensifying competition and a strict regulatory environment are primary headwinds. Furthermore, although a recurring revenue stream is a positive for Quality Systems, it mostly comes from the lower margin Electronic data interchange (EDI) and RCM services.
Quality Systems continues to acquire businesses that improve its revenue opportunities on one hand and aggravate integration risks on the other. The company’s frequent acquisitions can impact its balance sheet as well as overall organic growth. This may limit Quality Systems’ expansion plans and worsen its risk profile.
On the brighter side, Quality Systems continues to focus on growing its presence in the Revenue Cycle Management (RCM), population health and interoperability solution markets. We believe, steady focus on the Revenue Cycle Management (RCM), population health and interoperability solution markets are expected to drive dividends in the coming quarters.
Share Price
Quality Systems has had an impressive run on the bourse over the last one year.
The company has gained roughly 12.3%, higher than the Zacks categorized Medical instruments sub-industry’s addition of just 1.4%. However, the current level compares unfavorably with the S&P 500’s return of 14.3%.
Estimate Revisions
The estimate revision for the stock has also been unfavorable.
The year has seen one estimate move south over the last two months, compared to no movement in the opposite direction. As a result, full-year estimates fell 2.6% to 74 cents per share over the same time frame.
Key Picks
Better-ranked stocks in the broader medical sector include Luminex Corporation , Edwards Lifesciences Corp. (EW - Free Report) and Inogen Inc (INGN - Free Report) . Notably, Inogen and Luminex sport a Zacks Rank #1 (Strong Buy), while Edwards Lifesciences carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Inogen projects a long-term adjusted earnings growth of almost 17.5%. The stock returned 77.8% over the last one year.
Luminex has an expected long-term adjusted earnings growth of almost 16.3%. The stock added roughly 7.1% over the last three months.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.6%. The stock has a solid one-year return of roughly 13.6%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>