eHealth, Inc.

eHealth Inc. (NASDAQ: EHTH) provides a health insurance marketplace with a technology and service platform that provides consumer engagement, education and health insurance enrollment solutions.

Why Should Investors Sell the Stock?

• Over Stretched Valuation: From Price to Earnings multiple standpoints, EHTH shares are extremely overvalued, as TTM P/E multiple of the company stood at 44.04x, whereas average industry peers are trading at TTM P/E multiple of 28.54x. This implies a premium of 54%. This premium valuation is not backed by strong financials as reported EBITDA margin, Operating margin, and Net Margin for Q1 FY21 was below the industry median.  For Q1 FY21, EHTH’s EBITDA Margin was 4.4% v/s Industry Median of 28.2%. Also, company registered negative Operating and Net Margins. For Q1 FY21, EHTH’s operating margins was (0.5%) v/s Industry median of 24.7% while net margin was (0.5%) v/s Industry median of 12.9%. Furthermore, company witnessed declining margins on a sequential basis, below is the glimpse for the same.

• Bearish Technical Indicators: EHTH shares are trading in a bearish zone, with 14-day RSI hovering below 40 and stock trading well below the 200-day and 50-day SMAs, which implies a long-term bearish trend.

Source: REFINITIV, Analysis by Kalkine Group 

Stock Recommendation:

EHTH shares are hovering in a bearish price trend, moreover the company’s shares are extremely overvalued despite significantly weak financials. Also, the company is generating lower return for its shareholders, with TTM ROE of 5% well below the industry median of 12%.  Therefore, we recommend a “Sell” rating on the stock at the current market price of USD 55.78 on July 29, 2021.

*The reference data in this report has been partly sourced from REFINITIV.

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