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eHealth (EHTH) Rallies 165% YTD: Will the Upside Continue?

Zacks Equity Research

eHealth, Inc.’s EHTH shares have surged 164.6% year to date, outperforming the industry's rise of 28.7% and the Zacks S&P 500 composite’s increase of 14.3%. With market capitalization of $2.3 billion, average volume of shares traded in the last three months was 0.5 million.

The rally was largely driven by the solid performance of the Medicare business. Revenues at core Medicare business grew 91% year over year in the first half of 2019 with EBITDA growing 891%. The company delivered positive surprise in the last two reported quarters with the average beat being 318.45%.

What’s Driving It?

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 are the other positives. Medicare segment revenues are now estimated between $318 million and $333 million in 2019, up from the earlier expectation of $281 million and $297 million.

The company expects 2019 major medical Medicare applications submitted online to grow 50% with the fourth quarter being the strongest in terms of online enrollment volumes. The number of enrollees in Medicare Advantage & Medicare supplement plans is expected to grow 56% between 2016 and 2026.

The company’s individual and family plan business 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 $52 million in 2019, up from the prior guidance of $34 million to $38 million.

eHealth upped its 2019 revenue expectation to a range of $365 million to $385 million from the prior range of $315 million to $335 million. Adjusted EBITDA is estimated between $65 million and $70 million, up from the earlier expectation of $55 million and $60 million. Concurrently, adjusted earnings are expected between $1.77 and $1.97 per share, up from the earlier expectation of $1.54 and $1.73 per share.

The company remains committed to double EBITDA margins over next five years banking on operating leverage.

The company also boasts a debt free balance sheet with $117 million in cash and $341 million in commissions receivable and $40 million line of credit as of Jun 30, 2019.

It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate earnings for 2019 and 2020 and has been revised higher by 17.2% and 15.5% in the past 30 days.

The consensus mark for earnings indicates year-over-year improvement of 72.9% for 2019 and 23.9% for 2020.

Other Stocks to Consider

Some other top-ranked stocks in the insurance industry include Brown & Brown, Inc. BRO, Willis Towers Watson Public Limited Company WLTW and Radian Group RDN. Each of these stocks carries a Zacks Rank #2 (Buy).

Brown & Brown markets and sells insurance products and services in the United States, England, Canada, Bermuda and the Cayman Islands. The company delivered positive surprise of 14.29% in the last reported quarter.

Willis Towers operates as an advisory, broking, and solutions company worldwide. The company delivered positive surprise of 1.14% in the last reported quarter.

Radian Group engages in the mortgage and real estate services business in the United States. The company delivered positive earnings surprise of 14.29% in the last reported quarter.

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