Why The Hospitalist Shares Crashed

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 medical services provider IPC The Hospitalist Company (Nasdaq: IPCM  ) plummeted 16% today, after its quarterly results and guidance missed Wall Street expectations.

So what: The stock has rallied in 2012 on a string of better-than-expected results, but today's third-quarter miss -- EPS of $0.46 on revenue of $127.7 million versus the consensus of $0.49 and $130 million -- coupled with downbeat guidance, triggers concerns over slowing growth. Revenue per patient fell 2.4%, while administrative expenses rose 14%, forcing Wall Street to bake in some less optimistic data into their valuation estimates.

Now what: Management now sees full-year EPS of $1.88-$1.92 and $520 million-$524 million, down from its prior view of $1.96-$2.06 and $520 million-$530 million. According to CEO Dr. Adam Singer:

While we are seeing some softening in hospital census in the fourth quarter, our business model remains fundamentally strong and we are confident in our ability to continue to execute our proven growth strategy through recruiting, contracting and acquisitions.

More important, with the stock now well off its 52-week highs, and trading at a reasonable forward P/E of 15, today might be a decent time to bet on that long-term bullishness.

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