What The Street Gets Wrong About Evolent Health, Cowen's 'Best Small-Mid Cap Idea'

Evolent Health IncEVHhealthcare providers, is an underappreciated stock that is best positioned to capitalize on the evolving healthcare landscape, analysts at Cowen stated in a research report. Cowen's Charles Rhyee not only maintains an Outperform rating on Evolent's stock with an unchanged $35 price target but names the stock as a "best small-mid cap idea" (check out Rhyee's track record).

The public and commercial health care sectors are both committed to addressing the rising cost of health care through a shift in reimbursement models and Evolent offers a "comprehensive, turk-key solution" to help providers, Rhyee argued. In fact, the company is a "clear market leader" and remains underappreciated due to the "complexity of the business model."

"We believe the market under appreciates how uniquely positioned EVH is to capitalize on the paradigm shift to value-based healthcare," the analyst argued. "We view EVH as undervalued due to the company's potential leverage within the business model, increased TAM, and market demand by the investment community."

4 Keys To Success

Evolent's business model has considerable leverage and the company can penetrate its existing partnerships due to:

The growing number of covered lives.

The transition to value-based care shifts into additional outcome measures.

Providers utilize additional capabilities such as new Identifi applications.

PBM and TPA services.

The company's Next Generation ACO solutions.

Finally, Evolent's management said in an investor day presentation that its total addressable market is as high as $150 billion, which marks an increase from a prior estimate of $45 billion. The analyst's 2018 revenue estimate implies the company has a "modest" penetration rate of 0.4 percent, which implies there is room for upside.

At time of publication, shares of Evolent were down 3.82 percent at $25.20.

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