Intrinsic value of eHealth, Inc. - EHTH

Previous Close

$82.15

  Intrinsic Value

$380.18

stock screener

  Rating & Target

str. buy

+363%

Previous close

$82.15

 
Intrinsic value

$380.18

 
Up/down potential

+363%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as EHTH.

We calculate the intrinsic value of EHTH stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  402
  620
  928
  1,346
  1,900
  2,611
  3,505
  4,603
  5,922
  7,481
  9,289
  11,357
  13,689
  16,287
  19,151
  22,277
  25,661
  29,298
  33,181
  37,306
  41,665
  46,256
  51,074
  56,118
  61,386
  66,879
  72,599
  78,551
  84,740
  91,172
Variable operating expenses, $m
  241
  372
  556
  807
  1,138
  1,565
  2,100
  2,757
  3,547
  4,480
  5,562
  6,801
  8,197
  9,753
  11,468
  13,340
  15,366
  17,544
  19,869
  22,339
  24,950
  27,699
  30,584
  33,604
  36,758
  40,048
  43,473
  47,037
  50,743
  54,595
Fixed operating expenses, $m
  89
  91
  93
  95
  97
  99
  101
  104
  106
  108
  111
  113
  115
  118
  121
  123
  126
  129
  132
  134
  137
  140
  144
  147
  150
  153
  157
  160
  164
  167
Total operating expenses, $m
  330
  463
  649
  902
  1,235
  1,664
  2,201
  2,861
  3,653
  4,588
  5,673
  6,914
  8,312
  9,871
  11,589
  13,463
  15,492
  17,673
  20,001
  22,473
  25,087
  27,839
  30,728
  33,751
  36,908
  40,201
  43,630
  47,197
  50,907
  54,762
Operating income, $m
  71
  157
  279
  444
  664
  948
  1,304
  1,742
  2,269
  2,892
  3,616
  4,443
  5,376
  6,416
  7,562
  8,814
  10,169
  11,625
  13,180
  14,832
  16,578
  18,417
  20,347
  22,367
  24,477
  26,678
  28,969
  31,354
  33,833
  36,410
EBITDA, $m
  76
  165
  289
  459
  685
  976
  1,341
  1,791
  2,332
  2,971
  3,713
  4,562
  5,519
  6,586
  7,762
  9,046
  10,436
  11,931
  13,526
  15,221
  17,012
  18,899
  20,879
  22,952
  25,117
  27,375
  29,726
  32,172
  34,716
  37,360
Interest expense (income), $m
  0
  0
  5
  11
  20
  32
  49
  69
  96
  128
  167
  212
  265
  326
  394
  470
  554
  646
  745
  852
  966
  1,087
  1,214
  1,349
  1,490
  1,638
  1,793
  1,954
  2,121
  2,296
  2,477
Earnings before tax, $m
  71
  153
  267
  424
  632
  899
  1,235
  1,646
  2,142
  2,726
  3,404
  4,178
  5,050
  6,022
  7,092
  8,260
  9,523
  10,880
  12,329
  13,866
  15,492
  17,203
  18,998
  20,877
  22,839
  24,885
  27,016
  29,232
  31,537
  33,933
Tax expense, $m
  19
  41
  72
  115
  171
  243
  333
  445
  578
  736
  919
  1,128
  1,364
  1,626
  1,915
  2,230
  2,571
  2,938
  3,329
  3,744
  4,183
  4,645
  5,129
  5,637
  6,167
  6,719
  7,294
  7,893
  8,515
  9,162
Net income, $m
  52
  111
  195
  310
  461
  656
  901
  1,202
  1,563
  1,990
  2,485
  3,050
  3,687
  4,396
  5,177
  6,029
  6,952
  7,942
  9,000
  10,122
  11,309
  12,558
  13,868
  15,240
  16,673
  18,166
  19,721
  21,340
  23,022
  24,771

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  703
  1,087
  1,625
  2,358
  3,327
  4,573
  6,139
  8,061
  10,372
  13,101
  16,268
  19,889
  23,973
  28,524
  33,539
  39,014
  44,941
  51,310
  58,111
  65,334
  72,969
  81,009
  89,447
  98,280
  107,505
  117,125
  127,144
  137,567
  148,406
  159,670
Adjusted assets (=assets-cash), $m
  703
  1,087
  1,625
  2,358
  3,327
  4,573
  6,139
  8,061
  10,372
  13,101
  16,268
  19,889
  23,973
  28,524
  33,539
  39,014
  44,941
  51,310
  58,111
  65,334
  72,969
  81,009
  89,447
  98,280
  107,505
  117,125
  127,144
  137,567
  148,406
  159,670
Revenue / Adjusted assets
  0.572
  0.570
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
Average production assets, $m
  40
  61
  92
  133
  188
  259
  347
  456
  586
  741
  920
  1,124
  1,355
  1,612
  1,896
  2,205
  2,540
  2,900
  3,285
  3,693
  4,125
  4,579
  5,056
  5,556
  6,077
  6,621
  7,187
  7,777
  8,389
  9,026
Working capital, $m
  132
  204
  305
  443
  625
  859
  1,153
  1,514
  1,948
  2,461
  3,056
  3,736
  4,504
  5,358
  6,301
  7,329
  8,442
  9,639
  10,917
  12,274
  13,708
  15,218
  16,803
  18,463
  20,196
  22,003
  23,885
  25,843
  27,879
  29,996
Total debt, $m
  87
  206
  373
  600
  900
  1,287
  1,772
  2,368
  3,084
  3,930
  4,912
  6,035
  7,301
  8,711
  10,266
  11,963
  13,800
  15,775
  17,883
  20,122
  22,489
  24,982
  27,597
  30,336
  33,196
  36,178
  39,283
  42,515
  45,875
  49,367
Total liabilities, $m
  218
  337
  504
  731
  1,031
  1,418
  1,903
  2,499
  3,215
  4,061
  5,043
  6,166
  7,432
  8,842
  10,397
  12,094
  13,932
  15,906
  18,014
  20,254
  22,620
  25,113
  27,729
  30,467
  33,327
  36,309
  39,415
  42,646
  46,006
  49,498
Total equity, $m
  485
  750
  1,121
  1,627
  2,295
  3,156
  4,236
  5,562
  7,157
  9,040
  11,225
  13,724
  16,542
  19,681
  23,142
  26,919
  31,009
  35,404
  40,097
  45,080
  50,349
  55,896
  61,719
  67,813
  74,179
  80,817
  87,729
  94,922
  102,400
  110,173
Total liabilities and equity, $m
  703
  1,087
  1,625
  2,358
  3,326
  4,574
  6,139
  8,061
  10,372
  13,101
  16,268
  19,890
  23,974
  28,523
  33,539
  39,013
  44,941
  51,310
  58,111
  65,334
  72,969
  81,009
  89,448
  98,280
  107,506
  117,126
  127,144
  137,568
  148,406
  159,671
Debt-to-equity ratio
  0.180
  0.270
  0.330
  0.370
  0.390
  0.410
  0.420
  0.430
  0.430
  0.430
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
Adjusted equity ratio
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  52
  111
  195
  310
  461
  656
  901
  1,202
  1,563
  1,990
  2,485
  3,050
  3,687
  4,396
  5,177
  6,029
  6,952
  7,942
  9,000
  10,122
  11,309
  12,558
  13,868
  15,240
  16,673
  18,166
  19,721
  21,340
  23,022
  24,771
Depreciation, amort., depletion, $m
  5
  7
  10
  15
  21
  28
  37
  49
  63
  79
  97
  118
  143
  170
  200
  232
  267
  305
  346
  389
  434
  482
  532
  585
  640
  697
  757
  819
  883
  950
Funds from operations, $m
  57
  119
  206
  325
  482
  684
  939
  1,251
  1,626
  2,068
  2,582
  3,168
  3,830
  4,566
  5,377
  6,262
  7,219
  8,248
  9,346
  10,511
  11,743
  13,040
  14,401
  15,825
  17,312
  18,863
  20,478
  22,158
  23,905
  25,721
Change in working capital, $m
  50
  72
  101
  138
  182
  234
  294
  361
  434
  513
  595
  680
  767
  855
  942
  1,029
  1,113
  1,197
  1,278
  1,357
  1,434
  1,510
  1,585
  1,659
  1,733
  1,807
  1,882
  1,958
  2,036
  2,116
Cash from operations, $m
  7
  47
  105
  187
  300
  450
  645
  890
  1,192
  1,556
  1,987
  2,488
  3,062
  3,711
  4,435
  5,233
  6,106
  7,051
  8,068
  9,154
  10,309
  11,530
  12,816
  14,166
  15,579
  17,056
  18,596
  20,200
  21,869
  23,605
Maintenance CAPEX, $m
  -3
  -4
  -6
  -10
  -14
  -20
  -27
  -37
  -48
  -62
  -78
  -97
  -118
  -143
  -170
  -200
  -232
  -267
  -305
  -346
  -389
  -434
  -482
  -532
  -585
  -640
  -697
  -757
  -819
  -883
New CAPEX, $m
  -15
  -22
  -30
  -41
  -55
  -70
  -88
  -109
  -131
  -154
  -179
  -205
  -231
  -257
  -283
  -309
  -335
  -360
  -384
  -408
  -432
  -454
  -477
  -499
  -522
  -544
  -566
  -589
  -613
  -637
Cash from investing activities, $m
  -18
  -26
  -36
  -51
  -69
  -90
  -115
  -146
  -179
  -216
  -257
  -302
  -349
  -400
  -453
  -509
  -567
  -627
  -689
  -754
  -821
  -888
  -959
  -1,031
  -1,107
  -1,184
  -1,263
  -1,346
  -1,432
  -1,520
Free cash flow, $m
  -10
  21
  68
  136
  231
  360
  529
  744
  1,013
  1,340
  1,730
  2,187
  2,713
  3,311
  3,981
  4,724
  5,539
  6,424
  7,378
  8,400
  9,488
  10,641
  11,856
  13,134
  14,473
  15,872
  17,333
  18,854
  20,438
  22,085
Issuance/(repayment) of debt, $m
  82
  119
  167
  227
  300
  386
  485
  596
  717
  846
  982
  1,123
  1,266
  1,411
  1,555
  1,697
  1,837
  1,974
  2,108
  2,239
  2,367
  2,492
  2,616
  2,738
  2,860
  2,982
  3,106
  3,231
  3,360
  3,492
Issuance/(repurchase) of shares, $m
  130
  153
  176
  196
  207
  204
  179
  124
  32
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  212
  272
  343
  423
  507
  590
  664
  720
  749
  846
  982
  1,123
  1,266
  1,411
  1,555
  1,697
  1,837
  1,974
  2,108
  2,239
  2,367
  2,492
  2,616
  2,738
  2,860
  2,982
  3,106
  3,231
  3,360
  3,492
Total cash flow (excl. dividends), $m
  202
  293
  411
  559
  739
  950
  1,193
  1,464
  1,761
  2,186
  2,712
  3,309
  3,979
  4,722
  5,536
  6,421
  7,376
  8,398
  9,487
  10,639
  11,855
  13,133
  14,472
  15,872
  17,333
  18,855
  20,438
  22,086
  23,798
  25,577
Retained Cash Flow (-), $m
  -182
  -264
  -372
  -506
  -668
  -860
  -1,080
  -1,326
  -1,595
  -1,883
  -2,186
  -2,499
  -2,818
  -3,140
  -3,460
  -3,778
  -4,089
  -4,395
  -4,693
  -4,984
  -5,268
  -5,547
  -5,822
  -6,094
  -6,366
  -6,638
  -6,913
  -7,192
  -7,478
  -7,773
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  20
  28
  39
  53
  70
  90
  113
  138
  166
  303
  526
  810
  1,161
  1,582
  2,076
  2,644
  3,286
  4,003
  4,794
  5,656
  6,587
  7,586
  8,650
  9,778
  10,967
  12,217
  13,526
  14,893
  16,319
  17,804
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  19
  26
  34
  44
  54
  65
  76
  86
  95
  159
  250
  346
  441
  531
  609
  672
  715
  737
  738
  719
  681
  629
  567
  498
  427
  356
  290
  230
  178
  134
Current shareholders' claim on cash, %
  93.4
  88.7
  85.4
  83.0
  81.3
  80.1
  79.3
  79.0
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9
  78.9

eHealth, Inc. provides a private online source of health insurance for individuals, families and small businesses. The Company is the parent company of eHealthInsurance, a private health insurance exchange where individuals, families and small businesses can compare health insurance products from various insurers side-by-side, and purchase and enroll in coverage online through its Websites (www.eHealth.com, www.eHealthInsurance.com, www.eHealthMedicare.com, www.Medicare.com and www.PlanPrescriber.com) or telephonically through its customer care centers. The Company also offers various online and pharmacy-based tools to help seniors navigate Medicare health insurance options, choose the right plan, and enroll in plans online or telephonically. It markets the availability of individual and family, small business and ancillary health insurance plans of various insurance carriers through its e-commerce platforms (www.eHealth.com and www.eHealthInsurance.com).

FINANCIAL RATIOS  of  eHealth, Inc. (EHTH)

Valuation Ratios
P/E Ratio -301.7
Price to Sales 8.1
Price to Book 19.3
Price to Tangible Book
Price to Cash Flow 377.1
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -1.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate -10.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -4.5%
Ret/ On Assets - 3 Yr. Avg. -6.9%
Return On Total Capital -6.5%
Ret/ On T. Cap. - 3 Yr. Avg. -9.6%
Return On Equity -6.5%
Return On Equity - 3 Yr. Avg. -9.6%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 98.4%
Gross Margin - 3 Yr. Avg. 97.7%
EBITDA Margin -0.5%
EBITDA Margin - 3 Yr. Avg. -0.5%
Operating Margin -3.2%
Oper. Margin - 3 Yr. Avg. -3.1%
Pre-Tax Margin -3.2%
Pre-Tax Margin - 3 Yr. Avg. -3.4%
Net Profit Margin -2.7%
Net Profit Margin - 3 Yr. Avg. -4.7%
Effective Tax Rate 16.7%
Eff/ Tax Rate - 3 Yr. Avg. -31.7%
Payout Ratio 0%

EHTH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EHTH stock intrinsic value calculation we used $251 million for the last fiscal year's total revenue generated by eHealth, Inc.. The default revenue input number comes from 0001 income statement of eHealth, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our EHTH stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for EHTH is calculated based on our internal credit rating of eHealth, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of eHealth, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of EHTH stock the variable cost ratio is equal to 60.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $87 million in the base year in the intrinsic value calculation for EHTH stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for eHealth, Inc..

Corporate tax rate of 27% is the nominal tax rate for eHealth, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the EHTH stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for EHTH are equal to 9.9%.

Life of production assets of 9.5 years is the average useful life of capital assets used in eHealth, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for EHTH is equal to 32.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $303.149 million for eHealth, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 22.252 million for eHealth, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of eHealth, Inc. at the current share price and the inputted number of shares is $1.8 billion.

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