The firm also slashed its price target down to $40 from $62 in a note released today.
The firm had rated the company a "buy" based on the idea that it would make $100 million annually by 2017 selling subsidized health insurance, but analysts changed their mind about the viability of that following comments made by management at a Jefferies conference.
TheStreet Ratings team rates EHEALTH INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate EHEALTH INC (EHTH) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 17.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, EHTH's share price has jumped by 49.48%, exceeding the performance of the broader market during that same time frame. Although EHTH had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- The gross profit margin for EHEALTH INC is currently very high, coming in at 97.81%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -3.04% is in-line with the industry average.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Insurance industry and the overall market, EHEALTH INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$5.41 million or 905.57% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: EHTH Ratings Report