Why eHealth Inc. Shares Are Hurting Today

Is this meaningful or just another movement?

May 2, 2014 at 4:17PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of eHealth (NASDAQ:EHTH) have lost roughly 13% of their value today after the company reported underwhelming earnings for the first quarter.

So what: eHealth recorded an 18% year-over-year rise in quarterly revenue to $50.9 million, which narrowly missed Wall Street's expectation of $51.2 million. The online health-insurance marketplace's adjusted earnings of $0.01 per share also missed the Street's $0.06 consensus estimate. Its Medicare-related business was the best performer in the quarter, as its $14.3 million in segment revenue represented year-over-year growth of 41%.

Looking ahead, eHealth expects to generate between $206 million and $213 million in full-year revenue, with earnings per share projected to range from $0.43 to $0.51. Wall Street had expected $211.3 million on the top line and $0.46 in EPS.

Now what: This isn't necessarily a bad report, but eHealth has been struggling to reverse its earnings woes for a while -- last year's first-quarter report showed $0.17 in adjusted EPS, and the company at the time provided a full-year EPS guidance range of $0.61 to $0.71 per share. Free cash flow has also fallen fallen by half on a trailing 12-month basis over the past five years. eHealth's huge surge in 2013 seems more like speculation than investing in a successful turnaround, and speculative stocks often end ugly, as eHealth shareholders have learned since the start of the year. There seems to be little reason to invest in this stock today.

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Alex Planes has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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