Even during a down period for the markets, eHealth has gone against the grain, climbing to $6.02. Its shares have yielded a 20.4% return over the last six months, beating the S&P 500 by 25.5%. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is there a buying opportunity in eHealth, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is eHealth Not Exciting?
We’re glad investors have benefited from the price increase, but we don't have much confidence in eHealth. Here are three reasons why EHTH doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, eHealth struggled to consistently increase demand as its $532.4 million of sales for the trailing 12 months was close to its revenue three years ago. This wasn’t a great result and is a sign of lacking business quality. 
2. Projected Revenue Growth Shows Limited Upside
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect eHealth’s revenue to stall, close to its flat sales for the past three years. This projection is underwhelming and suggests its newer products and services will not accelerate its top-line performance yet.
3. Cash Burn Ignites Concerns
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
eHealth’s demanding reinvestments have consumed many resources over the last two years, contributing to an average free cash flow margin of negative 4.9%. This means it lit $4.94 of cash on fire for every $100 in revenue. This is a stark contrast from its EBITDA margin, and its investments (i.e., stocking inventory, building new facilities) are the primary culprit.
Final Judgment
eHealth isn’t a terrible business, but it doesn’t pass our bar. With its shares outperforming the market lately, the stock trades at 3.7× forward EV-to-EBITDA (or $6.02 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at the most entrenched endpoint security platform on the market.
Stocks We Would Buy Instead of eHealth
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
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