Alignment Healthcare currently trades at $16.32 per share and has shown little upside over the past six months, posting a middling return of 3.6%. The stock also fell short of the S&P 500’s 11.6% gain during that period.

Given the weaker price action, is now a good time to buy ALHC? Or should investors expect a bumpy road ahead? Find out in our full research report, it’s free.

Why Are We Positive On Alignment Healthcare?

Founded in 2013 with a mission to transform healthcare for seniors, Alignment Healthcare (NASDAQ: ALHC) provides Medicare Advantage health plans for seniors with features like concierge services, transportation benefits, and technology-driven care coordination.

1. Customer Base Skyrockets, Fueling Growth Opportunities

Revenue growth can be broken down into the number of customers and the average spend per customer. Both are important because an increasing customer base leads to more upselling opportunities while the revenue per customer shows how successful a company was in executing its upselling strategy.

Alignment Healthcare’s total customers punched in at 223,700 in the latest quarter, and over the last two years, their count averaged 40.2% year-on-year growth. This performance was fantastic, reflecting its ability to "land" new contracts and potentially "expand" them later - a powerful one-two punch for sales.

2. EPS Improving Significantly

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Although Alignment Healthcare’s full-year earnings are still negative, it reduced its losses and improved its EPS by 45.5% annually over the last four years. The next few quarters will be critical for assessing its long-term profitability. An inflection point could be coming soon.

3. Increasing Free Cash Flow Margin Juices Financials

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, Alignment Healthcare’s margin expanded by 6.9 percentage points over the last five years. Alignment Healthcare’s free cash flow margin for the trailing 12 months was breakeven.

Final Judgment

These are just a few reasons why we think Alignment Healthcare is a high-quality business. With its shares trailing the market in recent months, the stock trades at 44.5× forward EV-to-EBITDA (or $16.32 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.

Stocks We Like Even More Than Alignment Healthcare

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