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eHealth (EHTH) Grows on Segmental Strength, Cost Woes Stay

·3 min read

eHealth EHTH is poised for growth banking on solid Medicare and Individual, Family and Small Business performance and financial position.

It has a solid track of delivering earnings surprise in the last nine quarters with an average beat of 133.64%.

The company’s strategic operational focus is on increasing effectiveness of telesales organization as it begins to ramp up for AEP, LTV maximization measures as well as expand online or e-commerce capabilities during the second quarter.

The private health insurance exchange service provider’s gradual shift in telesales from third-party vendor agents toward in-house agents is expected to drive Medicare business. This apart it will also help in Medicare enrollment growth and a reduction in acquisition cost per approved Medicare member. With continued momentum in the online Medicare enrollments, eHealth projects 53% online penetration by 2024. This in turn should continue to drive member retention.

Its Individual, Family and Small Business segment is expected to benefit from substantial increase in estimated lifetime values of individual and family plan members.

The company raised its 2021 outlook for adjusted EBITDA and segment profits, following change in calculation for excluding amortization of capitalized software development costs.

Adjusted EBITDA is anticipated to be $110-$125 million, higher than the previous guidance of $100-$115 million. The bottom line is estimated in the range of $2.77 to $3.26 per share in 2021.

Per the updated guidance, Medicare segment profit is forecast between $147 million and $164 million, indicating a rise from the prior guidance of $138-$155 million. For Individual, Family and Small Business segment, profit is expected between $19 million and $20 million, up from the previous guidance of $18-$19 million.

The company plans to ramp up its revenues at a five-year CAGR of 27% by 2024 and achieve adjusted EBITDA margin of 38%.

eHealth boasts a debt free balance sheet with $126.2 million in cash, cash equivalents and marketable securities as of Mar 31, 2021.

However, increasing expenses lead to margin contraction concerns. Its net margin contracted  over the last five quarters.

Also, return on equity, a measure reflecting how efficiently the company is utilizing its shareholders fund, decreased over the last six quarters.

Other Industry Players

Some stocks from the same industry include Brown & Brown BRO, Marsh & McLennan Companies MMC and Aon AON.

Brown & Brown delivered earnings surprise of 25.00% in the last reported quarter.

Marsh & McLennan delivered earnings surprise of 17.06% in the last reported quarter.

Aon delivered earnings surprise of 5.94% in the last reported quarter.     

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