Here's Why You Should Add eHealth (EHTH) to Your Portfolio

Zacks Equity Research

August 14, 2020 at 10:40 AM·4 min read

eHealth, Inc. EHTH is poised for growth, given solid performance of the Medicare business. The expected long-term earnings growth is pegged at 21%, way above the industry average of 12.2%. The company plans to increase its revenues at a five-year CAGR of 27% by 2024 and an adjusted EBITDA margin of 38%.

The stock has seen its estimates for 2020 and 2021 move up nearly 25% and 8.8%, respectively in the past 30 days, reflecting investor optimism.

Return on equity, a measure to identify how efficiently the company is utilizing its shareholders’ fund, was 12.7% in the second quarter of 2020, up from 7.7% in the year-ago period

The company delivered positive surprise in each of the last six reported quarters with the average beat being 160.33%. In the last reported quarter, the company generated earnings of 7 cents against the Zacks Consensus Estimate of a loss of 18 cents on the back of strong revenue and Medicare enrollment growth.

This Zacks Rank #1 (Strong Buy) private health insurance exchange service provider upped its guidance for 2020. Revenues are expected in the range of $630 million to $670 million compared with the prior range of $600 million to $640 million. Adjusted EBITDA is estimated between $140 million and $155 million, up from the earlier expectation of $125 million and $140 million. Net income is expected between $79 million and $94 million or $2.91 to $3.47 per share, up from the previous guidance of $70 million to $85 million or $2.55 to $3.10 per share. Adjusted net income per share is estimated between $3.83 and $4.32, up from the prior expectation of $3.41 to $3.90 per share.

eHealth’s Medicare business continues to deliver. The company’s investments in Medicare-related marketing initiatives and expansion of telesales capacity and online sales capability continue to drive growth. Medicare enrollment continues to grow as the company caters to solid demand via its omni-channel consumer engagement platform. The company is on track to achieve 37% online penetration in 2020, ahead of its prior target of 34%. It plans 53% online penetration by 2024. Medicare segment revenues are expected between $583 million and $619 million in 2020, up from the earlier expectation of $553 million and $589 million. Profit is now expected to be in the range of $176 million to $193 million, up from $157 million to $174 million expected earlier.

The company’s Individual, Family and Small Business segment too continues to perform well. eHealth expects substantial increase in estimated lifetime values of individual and family plan members going forward. Revenues from the business are likely to be between $47 million and $51 million in 2020. Profit is expected to be in the range of $17.0 million to $18.0 million

The company also boasts a debt free balance sheet with $200 million in cash, cash equivalents and marketable securities as of Jun 30, 2020.

Shares of the company have lost 21.1% year to date compared with the industry’s decline of 0.5%.

Other Stocks to Consider

Some other top-ranked companies are Arthur J Gallagher AJG, Brown and Brown BRO and Kinsale Capital Group KNSL, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Arthur J Gallagher delivered four-quarter average earnings surprise of 11.10%.

Brown and Brown delivered four-quarter average earnings surprise of 7.95%.

Kinsale Capital delivered four-quarter average earnings surprise of 20.00%.

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