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What happened
Shares of Athenahealth, Inc. (ATHN), a cloud-based healthcare service provider, jumped by as much as 20.8% in after-hours trading on Wednesday after the company issued a better-than-expected outlook for 2017. The stock has maintained that surge in Thursday's premarket trading.
So what
The key takeaway from Athenahealth's forward-looking guidance is that the company is forecasting that its total annual revenue could grow by as much as 21% next year to $1.33 billion. That upbeat estimate exceeds the Street's high-end revenue forecast for the company by roughly $20 million.
Now what
The core driver behind Athenahealth's strong outlook heading into next year is the continued growth of its Athenahealth-branded services and Epocrates-branded services. The big-picture issue is that the move toward digitized healthcare records and point-of-care systems -- which was originally incentivized by the Affordable Care Act as a cost-saving measure -- has apparently taken root in the U.S. healthcare system, transforming Athenahealth into one of the fastest-growing companies in the sector.
Is Athenahealth's stock now a screaming buy? While a potential 21% rise in annual revenue is certainly noteworthy, Athenahealth is also one of the most expensive stocks in the healthcare sector, with a forward price-to-earnings ratio of 42.7. Put simply, the market clearly expects Athenahealth to continue posting sky-high revenue growth for the foreseeable future, and that's not a sure thing in light of the forthcoming changes to the U.S. healthcare system that are expected to occur under President-elect Donald Trump.
