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Why Accretive Health Shares Got Crushed

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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 Accretive Health (NASDAQOTH: ACHI  ) plummeted 25% today after the hospital revenue services provider postponed the release of its fourth-quarter and full-year 2012 financial results.

So what: Accretive said that it is reviewing the way it recognizes revenue under its revenue cycle management agreements, triggering serious investor concern that it may have to restate earnings for previous periods. While the company said the any such restatement shouldn't impact total revenue recognized over the life of a contract, the announcement alone brings yet another cloud of uncertainty over the stock and calls management's credibility into question.

Now what: Expect the stock to remain under plenty of pressure in the short term.

"The company's gone radio silent, so we don't know the complete extent of what they're reviewing and what the outcome may be," cautioned Eric Coldwell, an analyst at Robert W. Baird & Co. "It's a riskier situation."

Of course, with a balance sheet boasting $177 million in cash and zero debt, Accretive's downside seems limited enough to make it an intriguing long-term bargain candidate.

While you can certainly make huge gains in health services stocks like Accretive, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

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Related Tickers

9/27/2016 3:59 PM
ACHI $2.50 Up +0.14 +5.93%
Accretive Health CAPS Rating: *****