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Shares of athenahealth Inc. (ATHN - Analyst Report) tanked after founder and president of hedge fund behemoth Greenlight Capital (GLRE - Snapshot Report) David Einhorn revealed that the company is highly overvalued and, as a result, he has decided to short the stock as its price will eventually fall.

Einhorn has, in fact, predicted that shares of athenahealth may fall substantially by as much as 80% from its all-time high reached earlier this year. He has also questioned the issue of innovation of the company and raised doubts about its ability to compete with privately held Epic Systems, which offers similar lines of services.

Shares of athenahealth sunk nearly 15% till date after Einhorn’s description of the stock as “bubble stock” at the Ira Sohn Investment Conference in New York last Monday.

athenahealth does appear overvalued compared to its peers. Its forward price-to-earnings (P/E) ratio of 443.2 is higher than the P/E of 42.94 of its peer group. However, its long-term EPS growth of 23.8% is higher than the peer level of 17.6%.

athenahealth posted adjusted loss of $3.0 million or 8 cents per share in the first quarter of 2014 in stark contrast to earnings of $6.0 million or 16 cents per share in the same quarter of 2013. The loss per share was broader than the Zacks Consensus Estimate of a loss of a penny for the quarter.

Revenues in the quarter rose 29.8% to $163.0 million but lagged the Zacks Consensus Estimate of $170 million. Excluding the Epocrates and other revenues (consisting of third-party tenant revenues) totaling $14.8 million, core athenahealth revenues rose 23% to $148.2 million in the quarter.

Currently, athenahealth carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical products industry at this moment include Enzymotec Ltd. (ENZY - Snapshot Report) and INSYS Therapeutics, Inc. (INSY - Snapshot Report). Both of them carry a Zacks Rank #2 (Buy).

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