Accretive Health's Shares Surged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of health-care management services expert Accretive Health (NYS: AH) look as fresh as a new bottle of vitamins today, jumping as much as 12% on moderate trading volume.

So what: Goldman Sachs just upgraded Accretive from a hold rating to a buy with a price target of $31 per share. The firm cites an "overwhelming need" for hospitals to manage their finances better, which is exactly what Accretive can help with.

Now what: It's refreshing to see a Wall Street firm finding long-term opportunity behind short-term stock pressures, as Goldman did here. Mind you, the stock trades at a nosebleed-inducing 130 times trailing earnings and more than 10 times book value, levels more often found in high-tech superstars such as Amazon.com (NAS: AMZN) than in boring old hospital management services. Does Accretive deserve to jump another 38% from here, as Goldman suggests? I'm not so sure, especially when looking at the anemic 4% operating margin -- in the same neighborhood as Amazon's. Hmm ... were these stocks separated at birth?

Interested in more information about Accretive Health? Add it toMy Watchlist.

At the time this article was published Fool contributor Anders Bylund holds no position in any of the companies discussed here. Motley Fool newsletter services have recommended buying shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio, follow him on Twitter or Google+, or peruse our Foolish disclosure policy.

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