Zacks senior healthcare analyst Gregory Aurand, CFA has recently upgraded the shares of medical instrumentation company ArthroCare Corporation (ARTC) from a Hold to Buy. Here are some of the reasons why:

"In December 2007, concerns over an alleged investigation into ARTC’s selling practices and concerns over difficulties in obtaining 3rd-party reimbursement for its Plasma Disc Decompression product caused, in part, the stock’s downward movement. We believe the reimbursement negatives are overstated and the company is seeking factual corrections to a New York Post article on its selling practices.

"On December 14, 2007, ArthroCare Corporation announced that its board of directors has approved the repurchase of up to $75 million of its outstanding common stock. The timing and amount of shares repurchased will be determined by the company's management based on its evaluation of market conditions and other factors with a majority of the repurchases expected to be completed by March 31, 2008.

"The company also commented in a recent press report alleging that one of the company's reimbursement service providers may have engaged in inappropriate business practices, including an inaccurate allegation that the Massachusetts Attorney General's office was probing into ARTC's relationship with its service provider. However, recently, ArthroCare contacted the Massachusetts Attorney General's office and was informed that there was no such investigation. ArthroCare has carefully reviewed the article in question and found numerous material inaccuracies. The company intends to contact the publisher to request a correction of the factual inaccuracies contained in the article.

"As a result, management confirmed that its FDA-cleared plasma disc decompression products are globally recognized as being among the most clinically successful and cost-effective spinal therapies and, that the company has carefully reviewed the business practices of the service provider and found no evidence of any improper activities. At the current price of $47.69, ARTC trades at 32x our expected 2007 EPS of $1.49 and 25x 2008 EPS of $1.95. In-line to the average of comparables 1.3x 2008 P/E/G, our target moves to $59, roughly equal to 40x 2007 EPS and 30x 2008 EPS. Our rating moves to Buy."

Read the full analyst report on ARTC