Cramer Sees Allscripts (MDRX) Moving 44% Higher

As healthcare stocks had a great day on Wall Street yesterday, Jim Cramer highlighted several plays in the sector on his CNBC show, Mad Money. Cramer believes the sector is on the move as stocks within the group will benefit from the forthcoming Medicare spending bill, which will create incentives for using electronic prescriptions through 2010.

Cramer sees Allscripts (Nasdaq: MDRX) as one of the best plays on this potential catalyst, given its "lock in the e-prescription business." Cramer points out that while Allscripts currently has a large client base of 150,000 doctors and 700 hospitals, only about 2% of prescriptions were sent electronically last year, meaning Allscripts has a lot of room to maneuver and huge growth potential.

Jim attributed Allscripts weakness this year (down about 35% year-to-date) to "overall poor execution" of its electronic healthcare platform. Allscripts' management has indicated that the software is now ready for "prime time", however, and Cramer is sticking with management and suggesting investors buy the stock in anticipation of expected growth of 400% in electronic prescriptions.

Doing a little math, Cramer believes Allscripts could rise 44% from current levels as its valuation has now fallen considerably. Cramer informed viewers that Allscripts currently trades at only 18x earnings, "despite a 23.5% long-term growth rate." Cramer believes Allscripts' P/E will make its way back toward 25x its FY09 earnings, equating to a stock price around $17.50.

Cramer Effect is clearly in-tact today: shares of Allscripts are up about 5% just after the market open. The stock most recently traded at $12.70, up $0.54 on the day.

Allscripts Healthcare Solutions, Inc. provides clinical software, connectivity, and information solutions for physicians in the United States.