- By GF Value
The stock of NextGen Healthcare (NAS:NXGN, 30-year Financials) appears to be modestly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $18.49 per share and the market cap of $1.2 billion, NextGen Healthcare stock is estimated to be modestly overvalued. GF Value for NextGen Healthcare is shown in the chart below.
Because NextGen Healthcare is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 0.1% over the past three years and is estimated to grow 2.85% annually over the next three to five years.
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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. NextGen Healthcare has a cash-to-debt ratio of 1.27, which ranks in the middle range of the companies in the industry of Healthcare Providers & Services. Based on this, GuruFocus ranks NextGen Healthcare's financial strength as 7 out of 10, suggesting fair balance sheet. This is the debt and cash of NextGen Healthcare over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. NextGen Healthcare has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $549 million and earnings of $0.1 a share. Its operating margin is 3.62%, which ranks in the middle range of the companies in the industry of Healthcare Providers & Services. Overall, the profitability of NextGen Healthcare is ranked 6 out of 10, which indicates fair profitability. This is the revenue and net income of NextGen Healthcare over the past years: