eHealth (NASDAQ:EHTH) pulls back 11% this week, but still delivers shareholders favorable 13% CAGR over 5 years

By
Simply Wall St
Published
January 19, 2022
NasdaqGS:EHTH
Source: Shutterstock

Some eHealth, Inc. (NASDAQ:EHTH) shareholders are probably rather concerned to see the share price fall 50% over the last three months. But at least the stock is up over the last five years. Unfortunately its return of 88% is below the market return of 116%. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 68% decline over the last twelve months.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for eHealth

Because eHealth made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, eHealth can boast revenue growth at a rate of 32% per year. That's well above most pre-profit companies. It's nice to see shareholders have made a profit, but the gain of 13% over the period isn't that impressive compared to the overall market. You could argue the market is still pretty skeptical, given the growing revenues. It could be that the stock was previously over-priced - but if you're looking for underappreciated growth stocks, these numbers indicate that there might be an opportunity here.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
NasdaqGS:EHTH Earnings and Revenue Growth January 19th 2022

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling eHealth stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Investors in eHealth had a tough year, with a total loss of 68%, against a market gain of about 12%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand eHealth better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with eHealth .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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