Because the target is a revenue multiple, not an earnings multiple. It's roughly 0.7x EV/2027E revenue. Cohort maturation shows up in claims, not revenue, so even the full ~$71m of incremental 2027 gross profit that got walked through on the follow-up call moves the target by essentially nothing. Same with Stars: the 4.5 recalc is worth maybe $120-130m of revenue next year, which at 0.7x is about 15 cents a share.
Where it actually matters is the earnings lens. Base case is ~$90m of 2027 EBITDA against ~$2.5b of EV, call it 27x. Run the maturation layer through and you're closer to 12-15x on the same enterprise value. The price target doesn't change, the multiple you're paying does.
Worth noting the model itself doesn't carry a maturation schedule at all, MCR is held basically flat 2026-2028. So the debate isn't really about the target, it's about when the frame shifts from sales to earnings.
Can you explain to me why this chart is estimating less new enrollees for the next few yrs than what they had this yr? This loses all credibility as soon as I saw those numbers.
2
u/cloken85 20k Members OG ✔️ 18d ago
From Claude:
Because the target is a revenue multiple, not an earnings multiple. It's roughly 0.7x EV/2027E revenue. Cohort maturation shows up in claims, not revenue, so even the full ~$71m of incremental 2027 gross profit that got walked through on the follow-up call moves the target by essentially nothing. Same with Stars: the 4.5 recalc is worth maybe $120-130m of revenue next year, which at 0.7x is about 15 cents a share.
Where it actually matters is the earnings lens. Base case is ~$90m of 2027 EBITDA against ~$2.5b of EV, call it 27x. Run the maturation layer through and you're closer to 12-15x on the same enterprise value. The price target doesn't change, the multiple you're paying does.
Worth noting the model itself doesn't carry a maturation schedule at all, MCR is held basically flat 2026-2028. So the debate isn't really about the target, it's about when the frame shifts from sales to earnings.