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eHealth (EHTH) Gains 55% in a Year: More Room for Upside?

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eHealth, Inc.'s (EHTH - Free Report) shares have surged 55% in a year compared with the industry's increase of 13.2%. The Zacks S&P 500 composite rallied 17.3% in the said time frame. With a market capitalization of $2.21 billion, average volume of shares traded in the last three months was 1.2 million.

The company continues to benefit from higher Medicare advertising revenue, favorable market dynamics, higher enrolment volume and solid capital position.

It has a decent earnings surprise history too. Its earnings beat estimates in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 82.02%, on average.

Can It Retain the Momentum?   

The Zacks Rank #3 (Hold) insurance broker is well poised to gain from higher commission revenue and other revenues driven by solid performance of Medicare and Individual, Family and Small Business segments. Commission revenues contributed 92% to total revenues in the first half of 2020.

Medicare segment revenues increased 63% year over year in the first half of 2020, with segment profit growing 109%. Increase in Medicare plan approved members, owing to growth in Medicare Advantage plan approved members, higher Medicare advertising revenue, investment and marketing efforts in Medicare segment, and the increase in approved application volume are expected to drive the revenues in this segment going forward.

These tailwinds aided the company in maintaining a sustainable revenue growth trend over the past few years. Revenues increased at a seven-year (2012-2019) CAGR of 18.4%. The Zacks Consensus Estimate for the company’s 2020 and 2021 revenues is pegged at $654.6 million and $836.5 million, respectively. The figures indicate year-over-year increase of nearly 29.3% and 27.7%, respectively.

For 2020 the company expects revenues in the range of $632-$670 million, higher than the previous guidance of $600-$640 million. Also, adjusted EBITDA for 2020 is estimated to be in a range of $140 million to $155 million higher than the prior guidance range of $125 million to $140 million.

Approved members indicate the number of individuals on submitted applications that were approved by the relevant insurance carrier for the identified product during the current period. Given higher approved Medicare Advantage plan members, direct-to-consumer marketing effort, increase in agent productivity, favorable market dynamics and increase in enrolment volume, Medicare total approved members are expected to improve in the near term.

Additionally, eHealth boasts a debt free balance sheet with strong cash balance. In the second quarter, its cash and cash equivalents surged 652% from 2019-end level.

eHealth’s trailing 12-month return on assets of 10% is higher than the industry’s 6.7%. This highlights the company's efficient utilization of its assets to generate earnings.

The Zacks Consensus Estimate for 2021 earnings is pegged at $5.41, which indicates year-over-year increase of 30.4%. The expected long-term earnings growth is pegged at 21% compared with the industry average of 10.8%.

Stocks to Consider

Some better-ranked stocks in the insurance space are Manulife Financial Corp (MFC - Free Report) , Fidelity National Financial Inc. (FNF - Free Report) and First American Financial Corporation (FAF - Free Report) , each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Manulife Financial surpassed estimates in two of the last four quarters. The company has a trailing four-quarter earnings surprise of 6.79%, on average.

Fidelity National surpassed estimates in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 32.13%, on average.

First American Financial surpassed estimates in each of the last four quarters. It has a trailing four-quarter earnings surprise of 20.84%, on average.

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