eHealth, Inc. (EHTH) reported their second-quarter earnings after the market closed on Wednesday, July 23rd. That day, shares finished regular trading hours at $114.00. Management reported earnings and sales that beat Wall Street’s forecast and upped their guidance for the rest of the year.
Earnings per share were $0.07 per share versus expectations for a loss of $0.14; sales registered $88.8 million compared to projections of $80.8 million, guidance moved from full-year revenue of between $600 and $640 million to $630 to $670 million, and earnings per share (EPS) put the new target at $2.91 to $3.47 from previous guidance of $2.55 to $3.10 per share.
All that is seemingly good news, but investors weren’t buying it. No, they were selling it. EHTH dropped $34.83 by the time the market closed on July 24th at $79.71.
But you know who decided to buy it? Chief Executive Office (CEO) Scott N Flanders. He bought 50,000 shares at $71.54 on August 3rd. Before you open the calculator app, it’s $3,577,000. (1) Upon more inspection, there is a sort of can’t miss history to Flanders’ recent EHTH trading track record.
The last time he bought was in August 2016 at $9.15. Then, he sold in May 2019 at $60.95, hit the sell button again in July 2019 at $104.29, and once more in January 2020 at $109.94. Now, he’s back with the blue ticket (in days long gone, buys were handwritten on blue carbon copy tickets, at least where I worked.) See a pattern? I do.
Looking beyond 2020, analysts believe the private health insurance provider will generate consensus sales of $839.1 million with $5.35 per share at the bottom-line target next year. (2) In the past five-years, eHealth has traded at an average price to earnings (P/E) ratio of 41.47 (that’s rich) and at an average of 3.08 times sales.
If the company hits the street’s 2021 EPS projections and traded at the typical P/E for the last half-decade, the stock would hit $221.86. While a 40-something P/E might be a bit exaggerated for some, the current peer group earnings multiple stands at 27.95. Again, using 2021’s anticipated bottom-line and peer group P/E, we get a price of $149.53. That’s almost double EHTH’s August 13, 2020 closing price of $75.89.
There isn’t as much upside using the five-year average price to sales (P/S) figure of 3.07. If management delivered on analysts’ call for $839.1 million in 2021 sales and traded at 3.07 times sales, it would rise to $100.27. Once again, let’s compare eHealth to the peer group’s current P/S number of 2.85, and we get $92.87.
Outlook: Based on its peer group and recent P/E and P/S histories, eHealth, Inc. (EHTH) offers some decent upside for investors in the next 12 to 18 months. On the low end, shares would increase 22.37% on the low-end using the peer group’s current price to sales ratio. On the high end, shares would soar 192% with the insurance company’s average P/E since 2015.
Mix in CEO Scott N Flanders’ history of buying low and selling high, and EHTH could be appropriate for aggressive investors who don’t mind big price swings.