Should You Buy the Dip in GoHealth Stock?

: GOCO | GoHealth Inc. Cl A News, Ratings, and Charts

GOCO – Digital health stock GoHealth (GOCO) has fallen in price by high percentage double digits since its IPO in July 2020. However, with lower-industry valuation metrics and bullish analyst expectations, will GOCO be able to regain momentum in the near term? Read more to learn our view.

GoHealth, Inc. (GOCO) in Chicago, is a leading medicare-focused digital health company and health insurance marketplace. It leverages innovative technology to match customers with their ideal healthcare policy and carrier. However, the company has an ISS Governance QualityScore of 10, indicating high governance risk.

GOCO made its stock market debut through an initial public offering of 43.50 million shares on July 15, 2020. Since then, the stock has slumped 86% in price to close yesterday’s trading session at $3.05.

The bearish investor sentiment can be attributed to the company’s worse-than-expected earnings and low-profit margins in the past quarters.

Here is what could shape GOCO’s performance in the near term:

Low Profit Margins

GOCO’s 77.89% trailing-12-month gross profit margin is 24.2% lower than the 62.72% industry average. Its 0.16% net income margin is 99.5% lower than the 30.08% industry average, while its 6.79% levered free cash flow margin is 69.5% lower than the 22.24% industry average.

GOCO’s 0.41%, 0.08%, and 2.76%  respective trailing-12-month ROE, ROA, and ROTC compare with the 2.75%, 1.35%, and 6.02% industry averages. Its 16.66% EBITDA margin is 29.2% lower than the 23.54% industry average.

High Debt

GOCO’s trailing-12-month total debt stands at $443.49 million. However, the company’s total cash balance came in at $85.22 million. Thus, its net debt stands at $358.27 million. Its net operating cash outflow was  $215.47 million, raising concerns regarding its ability to meet its principal and interest repayment obligations. GOCO’s book value per share is negative $4.42, indicating that its liabilities exceed its assets.

Lower-than-Industry Valuation

In terms of forward non-GAAP P/E, GOCO is currently trading at 5.55x, which is 53.2% lower than the 11.84x industry average. Its 0.28 forward Price/Sales multiple is 92.2% lower than the 3.58 industry average.

In addition, GOCO’s 1.24 and 0,86 respective forward EV/Sales and Price/Book ratios are significantly lower than 2.95 and 1.32 industry averages. Its 5.01 forward EV/EBITDA multiple  is 59.7% lower than the 12.45 industry average.

Consensus Rating and Price Target Indicate Potential Downside

Of five Wall Street analysts that rated GOCO, three rated it Hold while two rated it Sell. The 12-month median price target of $5.00 indicates a 63.9% potential upside from yesterday’s closing price of $3.05. The price targets range from a low of $3.00 to a high of $8.00.

POWR Ratings Reflect Uncertainty

GOCO has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

GOCO has a C grade for Momentum. The stock is currently trading below its 50-day and 200-day moving averages of $3.84 and $7.55, respectively, indicating a death cross downtrend, justifying the Momentum grade.

Of 13 stocks in the C-rated Insurance – Brokers industry, GOCO is ranked #12.

In addition to the grade I have highlighted above, one can view GOCO ratings for Growth, Value, Sentiment, Stability, and Quality here.

Bottom Line

GOCO is a leading digital healthcare company that is poised to benefit from the accelerating health insurance industry. However, the company’s low profit margins and negative earnings surprise history are concerning. Thus, we think investors should wait until GOCO’s financials improve before investing in the stock.

How Does GoHealth, Inc. (GOCO) Stack Up Against its Peers?

While GOCO has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, Marsh & McLennan Cos. (MMC) and AFC Gamma, Inc. (AFCG), which have a B (Buy) rating.

Click here to checkout our Healthcare Sector Report

GOCO shares were trading at $2.92 per share on Thursday afternoon, down $0.13 (-4.26%). Year-to-date, GOCO has declined -22.96%, versus a -1.41% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
GOCOGet RatingGet RatingGet Rating
MMCGet RatingGet RatingGet Rating
AFCGGet RatingGet RatingGet Rating

Most Popular Stories on

:  |  News, Ratings, and Charts

Bulls in Charge…for Now at Least

Every since the S&P 500 (SPY) made new lows in mid June the bulls have been back in charge. At first it looked like your typical bear market rally. However, there are more and more signals going off that this may be the real deal. As in the new bull market may have arrived. That topic is a big deal as one's outlook, bullish or bearish, weighs heavily on how they construct their portfolio for the days and weeks ahead. That is why we will focus on that topic in today's commentary. Read on below for more…

:  |  News, Ratings, and Charts

The 3 Best Nasdaq 100 Stocks to Buy Now

The significant improvement in the inflation story has boosted investors’ confidence. However, market volatility is rife, and despite the uncertainties, the Nasdaq 100 has witnessed significant gains. Therefore, quality Nasdaq 100 stocks Johnson & Johnson (JNJ), Procter & Gamble (PG), and Novo Nordisk (NVO) could be ideal additions to your portfolio now. Let’s discuss the stocks in detail…

:  |  News, Ratings, and Charts

How to RIDE the Next Bull Market?

Growth stocks are back! And, they are leading the S&P 500 (SPY) higher after the brutal bear market investors experienced this year. Read on to find out the best strategy to profit from the next big bull market in growth stocks...

:  |  News, Ratings, and Charts

2 REITs to Buy and Hold for Decades

Despite the macroeconomic headwinds, real estate investment trusts (REITs) are expected to remain resilient due to rising demand, appreciation of property prices amid the high inflation, and increasing rental income. Moreover, REITs are considered ideal investments in uncertain market conditions since they pay out at least 90% of their income as dividends. So, quality REITs LTC Properties (LTC) and Getty Realty (GTY) could be ideal investments to survive the short-term market fluctuations and create solid long-term returns. Continue reading…

:  |  News, Ratings, and Charts

How to RIDE the Next Bull Market?

Growth stocks are back! And, they are leading the S&P 500 (SPY) higher after the brutal bear market investors experienced this year. Read on to find out the best strategy to profit from the next big bull market in growth stocks...

Read More Stories

More GoHealth Inc. Cl A (GOCO) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All GOCO News