Evolent Health has gotten torched over the last six months - since May 2025, its stock price has dropped 54.7% to $3.91 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Evolent Health, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free for active Edge members.
Why Is Evolent Health Not Exciting?
Even though the stock has become cheaper, we're sitting this one out for now. Here are three reasons we avoid EVH and a stock we'd rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but within healthcare, a stretched historical view may miss new innovations or demand cycles. Evolent Health’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 7.1% over the last two years was well below its five-year trend. 
2. Previous Growth Initiatives Have Lost Money
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Evolent Health’s five-year average ROIC was negative 1.8%, meaning management lost money while trying to expand the business. Investors are likely hoping for a change soon.
3. Short Cash Runway Exposes Shareholders to Potential Dilution
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Evolent Health burned through $68.67 million of cash over the last year, and its $1.08 billion of debt exceeds the $116.7 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.
Unless the Evolent Health’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.
We remain cautious of Evolent Health until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.
Final Judgment
Evolent Health isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 17× forward P/E (or $3.91 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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