uploads/2019/07/AdobeStock_220220414.jpeg

Why eHealth Stock Was Soaring Today

By

Updated

Yesterday, private online health insurance exchange eHealth (EHTH) reported its second-quarter results after the market closed. The company reported revenues of $65.8 million, a year-over-year rise of 101%. Revenues came in higher than the consensus estimate by $24.78 million. The company reported non-GAAP EPS of $0.10. This number also beat the consensus estimate—by $0.46.

After the news, eHealth’s share price rose 25.75%, and it’s trading at $107.49.

Fiscal 2019 guidance

On its second-quarter earnings call, eHealth has guided for fiscal 2019 revenues of $365 million–$385 million. This range is higher than the previous projection of $315 million–$335 million. The company reported revenues of $251 million in fiscal 2018.

eHealth also revised its fiscal 2019 adjusted EBITDA guidance from $55 million–$60 million to $65 million–$70 million. The company has guided for non-GAAP net income per diluted share of $1.77–$1.97, which is significantly higher than the guidance provided in February 2019 of $1.54–$1.73. This change is mainly due to solid performance in 2019 so far.

The revised guidance is especially notable, considering the uncertainty around the Affordable Care Act. Health insurers offer ACA-compliant plans to the individual and family market through eHealth. To see how an ACA repeal could affect the health insurance industry, check out Healthcare Stocks to Watch Amid the ACA Constitutionality Debate.

eHealth’s growth drivers

The company expects its Medicare segment to report revenues of $318 million–$385 million in fiscal 2019. This range is a significant improvement from the previous guidance of $281 million–$297 million. eHealth also expects its Medicare segment profits to come in at $96 million–$99 million for fiscal 2019. This range is higher than the previous guidance of $90 million–$94 million.

In the second quarter, the Medicare segment reported revenues of $52.3 million, a year-over-year rise of 105%. Profits from this segment also rose to $6.1 million in the second quarter of 2019, a significant improvement compared to a loss of $1.5 million in the second quarter of 2018. Submitted Medicare applications rose 67%. The total approved Medicare members also rose, by 78% year-over-year. At the end of the second quarter, eHealth had enrolled 521,000 revenue-generating Medicare members. This total is significantly higher than its 321,000 members at the end of the Q2 of 2018.

Plus, eHealth has also raised its revenue guidance for its Individual family and small business segment. Instead of the previous projected $34 million–$38 million, the company expects this segment to report revenues of $47 million–$52 million. The segment is expected to generate profits of $10 million–$12 million in fiscal 2019. This range is significantly higher than the previous guidance of $0 million–$1.0 million.

eHealth’s valuation

eHealth is currently trading at a forward price-to-earnings multiple of 41.27. This multiple is significantly higher than peers’ such as HMS Holdings, Brown & Brown, and Willis Towers Watson Public Limited. The high valuation is due to solid earnings performance and a significant upward revision across all financial metrics of the fiscal 2019 guidance.

The ten analysts tracking eHealth have an average target price of $112.11 for the stock, which indicates 12-month upside potential of 4.40%, based on the current trading price.

More From Market Realist