With shares of Allscripts Healthcare Solutions (NASDAQ:MDRX) trading at around $9.12, is MDRX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Overreactions often present the best buying opportunities for stocks. Allscripts Healthcare Solutions got slammed yesterday after an announcement that the company would not be taken private, and that CEO Glen Tullman would be replaced by Paul Black. What some investors failed to realize was that Tullman did a poor job. Paul Black, on the other hand, had a highly successful career at Cerner (NASDAQ:CERN). It’s amazing how quality leaders have a habit of achieving great results, especially when they’re underestimated. People who are wired this way are highly competitive and will be extremely motivated to prove their worth. Therefore, it wouldn’t be a good idea to bet against Paul Black right now. Another important note here is that the decision not to go private would only be made if there was a strong belief that the future held a great deal of promise.
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At the present time, Allscripts Healthcare Solutions is dealing with decreasing sales and increased expenses. However, revenue has been increasing on an annual basis. Therefore, the solution is there to be found. Odds are pretty good that Paul Black will find that solution.
Here’s another way to look at it: can things possibly go as bad as they have gone over the past few years? We have seen an acquisition of Eclypsis that didn’t go as planned, earnings consistently come in below expectations, and a CFO get fired. That’s pretty close to hitting bottom.
Now let’s take a look at some important numbers.