EVH - Evolent Health: Recent Pullback A Buying Opportunity Or Not? (Rating Downgrade)
2024-05-21 20:00:07 ET
Summary
- Following Evolent Health's latest numbers I have doubts arising about its ability to compound capital at an accelerating rate.
- The company is rotating assets away from invested capital into cash, a signal it may lack a forward investment runway to grow.
- The decline in PMPM and various factors have contributed to the challenges faced by Evolent Health.
Investment updates
There have been several updates to the investment thesis of Evolent Health ( EVH ) following our last appraisal of the company. That publication titled “ Business economics still appealing ”, published in July 2023, covered a number of factors which tilted the investment case toward a buy.
Back then I was of the opinion that the company's capital budgeting and acquisition strategy could unlock shareholder value, given reasonably healthy leverage ratios, and potential gains in profitability following its IPG and NIA transactions. My numbers had the company increasing its return on invested capital to 10% in 2023, stretching up to 13% this year, and 15% by FY‘25....
Evolent Health: Recent Pullback, A Buying Opportunity Or Not? (Rating Downgrade)