EVH · Evolent Health
Conviction · Medium · more likely to lead the S&P 500 over the next three months, by a modest margin
Wrong if: a daily close below $4.20
Note written ·
How this view changed
- · Rated Medium. Results, 5 November 2026: Q3 2026 medical expense ratio fell to 93.0% from 95.3% in Q2, and full-year adjusted EBITDA guidance was raised to $130-135M from $120-135M, with management signalling 2027 adjusted EBITDA of $150M or more.
Price against the kill line
16.7% clear of its kill line on the 13 November 2026 close.
How to read this
The red mark is the price level of the published kill line: a close through it (a weekly close, on a weekly line) would prove the research note wrong on price. The dot is where the stock closed on 13 November 2026; a dot left of the mark has closed through its line.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close below $4.20, on record since 10 November 2026. The shares are up 11.1% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close below $4.20, under the 50-day moving average and the 5 November 2026 Q3-report-day close, which would erase the post-report gain. The case also fails if the Q4 report shows the medical expense ratio above 93.0% or a 2027 adjusted EBITDA midpoint below $150 million.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Industrials
Quarter to 30 September 2026, filed 5 November 2026; valuation at the 13 November 2026 close
- Net income, latest quarter ($M)
- −23.6
- Net income, four quarters ($M)
- −508
- Shareholders' equity ($M)
- 373
- Price to book value (×)
- 1.5
- Revenue, latest quarter ($M)
- 725
- Revenue, change on a year (%)
- +51.3
- Market value ($M)
- 554
Evolent Health is an insurer: net cash, enterprise value and free cash flow are not shown, because a bank's or insurer's cash and investments back its deposits and policies.
All filed numbers
What Evolent Health reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 725 | +51.3 | 12.2 | −0.9 |
| first filed | 653 | +46.9 | 12.4 | −1.5 |
| first filed | 496 | +2.6 | 16.9 | −2.1 |
| first filed | 469 | −27.5 | 20.7 | −87.1 |
| first filed | 480 | −22.8 | 20.8 | 0.2 |
| first filed | 444 | −31.3 | 22.6 | −0.3 |
| Pre-tax income ($M) | −22.4 |
| Net income ($M) four quarters: −508 | −23.6 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −0.9 |
| Operating cash flow ($M) | 64.9 |
| Capital spending ($M) | Not reported |
| Free cash flow ($M) | Not meaningful |
Not meaningful: a bank's or insurer's operating cash flow moves with its deposits, loans and policy reserves, so it is not cash free for its owners.
| Cash and short-term investments ($M) | 148 |
| Debt ($M) non-current long-term debt | 970 |
| Net cash, cash less debt ($M) | Not meaningful |
| Deferred revenue ($M) −60.6% on a year | 0.8 |
| Backlog, orders not yet delivered ($M) −79.9% on a year | 6.0 |
| Receivables ($M) | 443 |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 373 |
Not meaningful: a bank's or insurer's cash and investments back its deposits and policies.
| Market value ($M) | 554 |
| Enterprise value, market value plus net debt ($M) | Not meaningful |
| Enterprise value to sales (×) | Not meaningful |
| Enterprise value to operating income (×) | Not meaningful |
| Price to earnings (×) | Not meaningful |
| Price to book value (×) | 1.5 |
| Free-cash-flow yield (%) | Not meaningful |
Not meaningful: a bank's or insurer's cash and investments back its deposits and policies.
Not meaningful: a bank's or insurer's operating cash flow moves with its deposits, loans and policy reserves, so it is not cash free for its owners.
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 10.5% of shares outstanding sold short, 5.6 days of average trading to cover, −7.8% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $329K |
| 12 monthsfrom | $38K | $329K |
The thesis
Evolent Health's margin repair now rests on reported numbers. In the third quarter of 2026, medical costs fell as a share of revenue and management raised the low end of its 2026 profit guidance. The Q4 report, expected in late February 2027 with the first formal 2027 range, decides whether management's view of $150 million or more of 2027 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) holds.
The medical expense ratio (MER, the share of Performance Suite revenue paid out as claims) was 93.0% in Q3, down from 95.3% in Q2, per the company's 5 November 2026 release. Full-year adjusted EBITDA guidance moved to $130–135 million from $120–135 million. Management also said Q4 adjusted EBITDA should come in $11–16 million above Q3's $34.3 million.
On 10 November 2026, Humana, Evolent and American Oncology Network launched a cancer care model across eight states, per a Business Wire release. Evolent supports it with oncology clinical pathways, quality programs and provider performance reporting. The release gave no financial terms or patient counts, so the deal adds weight to Evolent's oncology relationships but does not change the earnings math.
The price reflects doubt about delivery. The shares closed at $4.77 on 12 November 2026, up 1.9% over three months and below the $6.11 consensus target MarketBeat reported on 6 November 2026. The rating is Medium because Q3 showed margins improving ahead of plan and guidance rising, while a heavy debt load and an unresolved refinancing keep the margin for error small.
Bullish and bearish views on Evolent Health, Inc
The bull case on Evolent Health, Inc (EVH), in brief: medical costs improved ahead of plan. The bear case: margins remain below last year.
Bull case
- Medical costs improved ahead of plan. The Q3 2026 MER was 93.0% against 95.3% in Q2, per the 5 November 2026 release. On the call, chief financial officer Mario Ramos called an analyst's implied Q4 ratio near 91% "directionally correct", per the Motley Fool transcript.
- Guidance rose for 2026 and points higher for 2027. The company now guides 2026 adjusted EBITDA to $130–135 million, and the expected Q4 step-up over Q3 widened to $11–16 million from $7–15 million. Management said on 5 November 2026 it has "a high degree of confidence" that the 2027 midpoint will be $150 million or higher.
- Oncology relationships are widening. The Humana and American Oncology Network model launched in eight states on 10 November 2026, per Business Wire, and builds on a Humana relationship of more than 20 years. Separately, a national payer's oncology expansion into 11 more states took effect on 1 November 2026, and a second client adds about 1 million commercial lives on 1 January 2027, per the Q3 call.
- Renewals and analyst targets moved up. Evolent renewed its largest Surgical Management customer for four years, per the 5 November 2026 release. Oppenheimer raised its target to $7 from $6 (outperform) and Needham to $6 from $5 (buy) on 6 November 2026.
Bear case
- Margins remain below last year. Q3 2026 adjusted EBITDA was $34.3 million, a 4.7% margin, against $39.0 million and 8.1% a year earlier, on revenue up 51% to $725.4 million. The Q3 MER of 93.0% compares with 85.0% in Q3 2025.
- Debt is heavy against earnings. Long-term debt, net, was $969.5 million against $148.3 million of cash on 30 September 2026, per the Q3 release. Management put full-year operating cash flow at $10–20 million after about $60 million of cash interest.
- Refinancing could dilute holders. Management plans up to $50 million of debt reduction by year-end and is pursuing refinancing through "capital markets and strategic alternatives" over 12 to 24 months, per the 5 November 2026 call. The form of that refinancing has not been disclosed.
- 2027 carries named headwinds. Management cited Medicaid-driven membership attrition, scope adjustments and AI investment as 2027 drags, and its 2027 framing assumes no change to current healthcare legislation. The company reported a GAAP net loss of $23.6 million, or $0.21 a share, in Q3.
Price setup
The shares closed at $4.77 on 12 November 2026, after $4.99 on 11 November 2026 and $4.80 on 10 November 2026, the day the Humana model was announced. The close on 5 November 2026, the day of the Q3 report, was $4.54. On adjusted daily closes, the 50-day moving average is $4.21 and the 200-day is $3.91 as of 12 November 2026, so the price sits above both.
The last close is 23.7% below the 52-week intraday high of $6.25 set on 14 July 2026. The 52-week closing low is $2.17 on 30 March 2026. The three-month change is +1.9% against the $4.68 close of 14 August 2026, so the post-report gains have only brought the shares back to their mid-August level.
The 50-day moving average and the 5 November 2026 close bracket the zone the case turns on: a fall back through them would hand back the whole post-report move. The last insider transaction on file is President Daniel McCarthy's sale of 65,892 shares at $5.00 on 26 August 2026 under a Rule 10b5-1 pre-arranged plan, per his SEC Form 4 filed 28 August 2026.
Catalysts ahead
- ~1 December 2026 (est.): Expected launch of the oncology Performance Suite partnership (1.5M lives, about $300M annualized revenue per August guidance), pending regulatory approval. A launch on time adds a named 2027 revenue source; a delay removes part of the 2027 growth case.
- ~31 December 2026 (est.): Management's target date for up to $50M of debt reduction. Shows whether cash generation supports deleveraging without equity issuance.
- 1 January 2027: Go-live of an oncology expansion covering about 1 million commercial lives. Confirms contract growth feeding 2027 revenue.
- ~26 February 2027 (est.): Q4 2026 results with formal 2027 revenue and adjusted EBITDA guidance. Decides whether the medical expense ratio kept falling and whether the 2027 adjusted EBITDA midpoint reaches $150M.
What would change the view
A daily close below $4.20, under the 50-day moving average and the 5 November 2026 Q3-report-day close, which would erase the post-report gain. The case also fails if the Q4 report shows the medical expense ratio above 93.0% or a 2027 adjusted EBITDA midpoint below $150 million.
The risks this note tracks, each with what would confirm it:
- Medical costs reverse after the Q3 improvement. Confirmed by: a Q4 2026 medical expense ratio above 93.0% or full-year adjusted EBITDA below the $130M guidance floor.
- 2027 guidance falls short of management's signal. Confirmed by: a formal 2027 adjusted EBITDA range with a midpoint below $150M at the Q4 report.
- Refinancing dilutes shareholders. Confirmed by: an equity or equity-linked offering announced as part of the capital-structure plan.
- Medicaid membership attrition cuts revenue. Confirmed by: Management quantifying Medicaid-driven membership losses that lower the 2027 revenue range.
What it trades with
The shares trade on Evolent's own medical-cost results more than on the market. Medical-cost trend reports from managed-care insurers, especially in oncology and Medicaid, bear on the same claims experience that drives Performance Suite margins. Humana, now a named partner in the 10 November 2026 oncology model, raised its 2026 earnings outlook the same day, per Benzinga. With $969.5 million of long-term debt, net, on 30 September 2026, credit conditions and interest rates shape the refinancing path the company named on 5 November 2026.
The evidence, claim by claim (8)
- Q3 2026 revenue $725.4M vs $479.5M a year earlier; GAAP net loss $23.6M ($0.21 per share) vs $26.9M. Evolent Q3 2026 results release · as of
- Q3 2026 medical expense ratio 93.0% vs 95.3% in Q2 2026 and 85.0% in Q3 2025; adjusted EBITDA $34.3M at a 4.7% margin vs $39.0M at 8.1%. Evolent Q3 2026 results release · as of
- FY2026 adjusted EBITDA guidance raised to $130-135M from $120-135M; revenue guidance of $2.6-2.7B reiterated. Evolent Q3 2026 results release and call · as of
- Management expects Q4 adjusted EBITDA $11-16M above Q3, up from a $7-15M step-up, and a 2027 adjusted EBITDA midpoint of $150M or higher. Q3 2026 earnings call · as of
- Company targets up to $50M of debt reduction by year-end and refinancing via capital markets and strategic alternatives over 12-24 months; full-year operating cash flow guided to $10-20M after about $60M of cash interest. Q3 2026 earnings call · as of
- Humana, Evolent and American Oncology Network launched a cancer care model in eight states that drops most prior authorization for anticancer drugs; financial terms not disclosed. Business Wire release, 10 November 2026 · as of
- Oppenheimer raised its target to $7 from $6 (outperform); Needham raised its target to $6 from $5 (buy); consensus target $6.11. MarketBeat, 6 November 2026 · as of
- President Daniel McCarthy sold 65,892 shares at $5.00 on 26 August 2026 under a Rule 10b5-1 plan. SEC Form 4 filed 28 August 2026 · as of
Sources
- Evolent Q3 earnings: $725M revenue, raises EBITDA guidance · stocktitan.net
- Evolent Health (EVH) Q3 2026 Earnings Call Transcript · fool.com ·
- New oncology model from Humana, Evolent and American Oncology Network eliminates prior authorization burden · finviz.com ·
- Evolent Health (NYSE:EVH) Stock Gets Price Target Boost from Oppenheimer · marketbeat.com ·
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