What I want to see

Keep up the good work

Just keep doing what you’ve been doing Gary (Lauer that is, the CEO).

There’s a reason the market is placing a premium on shares of eHealth, it’s because they are executing, and are one of the few companies showing nice growth, tons of profit, and free cash flow generation in these rough economic times.

I’m not being greedy here.

All I want to see is for things to continue nice and steady with a good outlook and business trends.

What We Need To See

Meet or beat expectations

For the market to continue to bestow a premium valuation on shares of eHealth, the company must continue to do what it has been doing.

We need to hear and see that things are steady and not deteriorating at all.

I don’t think that we need to hear any upward revisions, and in fact I think it’s wise and prudent for management to keep things on the expectations side low.

What We’ll Probably See

Steady as she goes

Looking at eHealth’s track record of always matching or beating estimates, I don’t foresee a problem in that arena.

I think eHealth matches or slightly beats estimates (they may have taken some of the extra earnings in the quarter and put them towards advertising as they said they would), but don’t look for eHealth to crush estimates, just gently touch the high end, and slightly exceed them.

Bottom Line

Shares a little pricey, but you get what you pay for

As I already talked about, eHealth caught my attention late last year when I heard the CEO present at an investor conference.

I had always liked the company’s business model, but never invested because valuation was always too rich.

That valuation finally came down to a reasonable level, and instead of being a value trap like other names, eHealth remained true to its downward revisions, stuck with them, and beat them to truly present itself as a great company at a good price.

Nothing has changed in that time frame, aside from the company’s shares rocketing up the charts way ahead of the market’s pace.

While at the top end of my buy range, I still think that a premium valuation on eHealth is warranted, and that the chart and fundamentals look very strong here.

I think a purchase on a pull back would be wise for at least a 1/4 position of your portfolio, and look to possibly unload shares if the fundamentals deteriorate, or the stock races too far ahead of those fundamentals.

Stay tuned, as I’ll be watching this one very closely over the next few months for a possible exit strategy if that happens, but until then, eHealth remains one of my most solid plays out there in an uncertain market and earnings environment for many other companies.

• Start: with my initial company write-up here.
• OR: read my latest company analysis and quarterly earnings breakdown here.

–> Get updates you WON’T find on PeakStocks.com by following me on Twitter. Click Here.

*As of 4-22-09. Except share price, all values in millions.

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