Evolent Health (EVH): Evaluating Valuation After Earnings Miss and Upbeat Profit Outlook

Evolent Health (NYSE:EVH) has landed in the spotlight after releasing a quarterly update that was a mixed bag for investors. The company reported revenues and earnings per share that missed Wall Street’s expectations, triggering a 5.3% drop in the stock price. Yet, CEO Seth Blackley took the opportunity to highlight a brightened outlook, pointing out faster-than-usual profitability targets and an accelerating new business pipeline supported by a push into AI and automation initiatives.

This latest move comes on top of an eventful run for Evolent Health. The share price has seen significant swings, with momentum picking up over the past three months but still sharply lower for the year, down more than 70% compared to this time last year. While volatility has been present, bullish analyst sentiment and a few sector-wide tailwinds in healthcare technology have kept some investors hopeful that the business’s transformation could offer fresh upside.

Given these twists, it is worth asking whether there is genuine value on offer after the latest earnings stumble, or if the market is already factoring in every hint of future growth.

Most Popular Narrative: 41.7% Undervalued

According to the most widely followed analyst narrative, Evolent Health is considered dramatically undervalued. The fair value estimate is driven by anticipated growth in both market reach and profitability as the company focuses on value-based care and technology-driven transformation.

The shift towards value-based care and demand for advanced population health platforms is accelerating, driving Evolent's expanding addressable market. This is evidenced by pipeline growth and multi-year partnerships, supporting long-term revenue growth above industry averages.

Eager to uncover what fuels such a bullish forecast? The heart of this narrative relies on a blend of ambitious revenue expansion, margin turnaround, and a valuation model that expects major financial milestones instead of relying on the status quo. Curious about the expectations baked in? Dive into the numbers behind this fair value call.

Result: Fair Value of $15.46 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent reliance on uncontracted deals and heavy client concentration could derail Evolent's growth narrative if pipelines stall or major clients pull back.

Find out about the key risks to this Evolent Health narrative.

Another View: Discounted Cash Flow Perspective

Looking at Evolent Health through our DCF model provides another layer to the valuation story. This approach also suggests the company is trading well below its estimated fair value. The key question is whether it can capture the growth needed to realize that upside.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Evolent Health for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Evolent Health Narrative

If you see the story differently or want to dig into the numbers yourself, you can quickly build your own Evolent Health narrative and reach your own conclusions. This process often takes just a few minutes. Do it your way

A great starting point for your Evolent Health research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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