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 athenahealth (NASDAQ:ATHN), a provider of cloud-based billing and clinical services to medical practices throughout the U.S., tumbled as much as 14% after noted contrarian and hedge fund manager David Einhorn slammed the company's current valuation.

So what: Following the closing bell on Monday, Einhorn advised his clients that athenahealth represents nothing more than a "bubble stock," and that it's being treated like a cloud-computing play when its software is set up more as a traditional business-to-business bill collection service. Einhorn also questioned athenahealth's ability to compete against privately held competitors that may currently be off investors' radars. The end result was Einhorn coming out and suggesting to investors that they short the stock and that it could ultimately lose up to 80% or more of its value.

Now what: Under normal circumstances, I suggest ignoring analyst banter as it's typically a short-term driver of a stocks' share price. Einhorn, however, is a special case. His track record of being correct on short sales is pretty impressive, and when he talks, investors tend to listen. While his analysis will obviously be biased to the pessimists' side of the equation and ignores the fact that athenahealth is on pace to grow its top line by 24% in 2014 and 2015, it also highlights a concern I've shared for a long time about athenahealth: its valuation. Even following today's drop, it is valued at a whopping 84 times forward earnings, a figure that I consider far too rich for my blood, even with a 24% growth rate. I would suggest heeding Einhorn's warning that the company may be overvalued (though perhaps not as much as Einhorn insinuates) and head for the sidelines.

Athenahealth may have soared in 2013, but it'll probably be no match for this top stock over the long run
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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool recommends athenahealth. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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