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Stocks in this article: BIIB HSIC HL MDRX

Allscripts' troubles means earnings per share are constrained, likely staying below $1 this year and next. Yet if management can make the right moves to fix the business and return margins to historical levels, then EPS could move sharply higher. In the interim, the $200 million stock buyback can be used to aggressively reabsorb shares while they remain deeply out of favor. And this isn't a one-time move. In fact, there is already another $200 million buyback plan in place -- and even after that $400 million total is earmarked, Allscripts still has $350 million available for future buybacks.

So why should investors expect profits to eventually move higher? It's because the current numbers are being affected by a series of controllable factors that can be fixed. Allscripts' expenses have spiraled too high as management never made a big cost-cutting push after the company's mishandled merger with hospital information systems provider Eclipsys.

Indeed, the recent moves to bring in fresh management and a new chairman will likely lead to those cost-cutting measures investors had already expected to see. As analysts at Auriga Securities note, "the problems at Allscripts stem from the top, and we wouldn't be surprised to see further leadership turnover." That creates uncertainty right now, and shares may languish until the new team is fully in place and investors hear more about their turnaround strategies.

Yet Auriga's analysts, even as they rate shares a "hold," have a $14 target price, nearly 30% above current levels. And that target is based on very low expectations: By their math, shares are worth more than 15 times the downwardly-revised 2012 EPS of 90 cents (15 x 90 cents = $13.50). That multiple currently stands at 12.

To put that in perspective, rival Cerner (CERN) trades for around 35 times projected 2012 profits. Both of these companies operate in the same high-growth industry. And Cerner surely deserves a premium for better execution, but should Cerner's P/E be higher by a factor of three? If anything, Cerner is operating at peak levels and has little fat to cut. Allscripts's profit potential is more robust, simply because it is currently too bloated and also has room for improvement in terms of sales force execution.

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