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

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 (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.

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