agilon health, inc. (AGL) stock intrinsic value fair value estimate & owner earnings analysis

agilon health partners with established community primary-care physician groups and takes on the full cost of caring for their Medicare patients. Its local risk-bearing entities sign global capitation contracts with Medicare Advantage insurers, which pay a fixed monthly amount per member; agilon pays the medical bills and shares any surplus with the physician groups under partnership agreements that typically run 20 years. It also runs accountable care organizations in Medicare's ACO REACH and MSSP programs. At the end of 2025 it had about 511,000 Medicare Advantage members (down 3%) and 114,000 ACO beneficiaries (down 13%), with partner groups in places including Ohio, Michigan, Pennsylvania, Texas, New York and seven other states. Humana, Aetna and UnitedHealthcare account for a large share of its membership in some markets. The economics are simple and unforgiving: revenue is set by insurer premiums and Medicare rates, and profit is whatever is left after medical costs. So far nothing has been left. We measure owner earnings as operating cash flow, excluding working-capital timing swings, minus stock-based pay and the capital spending needed to keep the business running (including purchased software and other intangibles). On that measure agilon has lost money every year we can check: about $66 million in 2020, $394 million in 2021 (inflated by $292 million of stock pay tied to the IPO), $126 million in 2022, $232 million in 2023, $267 million in 2024 and $387 million in 2025. Per share, adjusted for the 1-for-25 reverse split effective March 30, 2026, that is -$14.20, -$16.27 and -$23.40 for 2023 to 2025. In 2025 revenue fell 2% to $5.93 billion while medical cost per member rose 5%, which the company attributes to elevated medical cost trends. We start from 2023 to 2025, the years the business has run at its current scale of roughly $4 billion to $6 billion of revenue. The median of those years is a loss of about $263 million a year before interest. Interest is small: $5.7 million paid in 2025. What changed in 2026: the first two quarters were clearly better. Revenue for the first half was flat at $2.92 billion, but medical costs for the current year fell to $2.60 billion from $2.81 billion a year earlier. Operating income was a $15.8 million profit against a $138.1 million loss. We estimate first-half owner earnings at about +$51 million. However, about $36 million of that came from prior-year claims costing less than reserved (a year earlier, prior-year claims had cost $37 million more than reserved). Net income of $66.9 million also includes a $19.0 million gain in discontinued operations. The business is seasonal. In 2025 the first half lost about $130 million and the full year lost $387 million, so a good first half does not make a good year. Owner earnings worsened 45% in 2025. We assume a large improvement for 2026 anyway, because two quarters of filed results support it, but not a return to profit. Profitability has never been shown for a full year. Nothing in the filings locks it in, and in January 2026 Medicare proposed an average 2027 payment increase of only 0.09%, so we do not credit it in the base case. Balance sheet at June 30, 2026: $107.2 million of cash and $78.4 million of securities, plus $71.6 million of restricted cash, which we treat as unavailable. The lender requires at least $50 million of cash at all times, so about $135.6 million is spare. The term loan is $30.3 million. In February 2026 its maturity was extended to February 2028, and its effective rate was 8.19% at year-end 2025. There is also a $16.0 million accrued contingent liability. After those items and a small charge for the loan's above-6% cost, net cash is about $88 million, or roughly $5 per share on 17.2 million diluted shares. Bear case (-$19.43 per share): the first-half gains fade in the second half, so 2026 loses about $200 million. In 2027 losses return to the 2023-2025 median of about $263 million, as flat Medicare rates meet rising medical costs. The spare cash is used up before the end of 2026, well before the loan matures, and the story ends in a dilutive rescue or restructuring. Those losses are worth about -$423 million today. Adding back $88 million of net cash leaves about -$335 million, so in this case the company appears to be worth less than nothing by about $335 million. Base case (-$9.46 per share): the first-half improvement carries into the second half, so 2026 loses about $120 million. In 2027 the loss is about $155 million, the same run rate without the one-time reserve release. The spare cash is largely used up by early 2027, so outside capital is needed in 2027, and we assume no value for current holders beyond that point. The business is worth about -$251 million, plus $88 million of net cash, leaving about -$163 million. The problem is continuing losses, not debt. Bull case (+$12.66 per share): the cost improvements prove durable. 2026 loses only about $25 million, and from 2027 the business earns a modest $20 million a year for ten years on its current membership, then fades to zero by 2039, because nothing in the filings shows these earnings lasting longer. That is worth about $130 million, plus $88 million of net cash, or about $218 million. We credit no membership growth or margin expansion beyond what the 2026 results show. Risks beyond these cases: the agreements between agilon's ACOs and their participating medical groups have an initial term through December 31, 2026, and three ACOs were moved from ACO REACH to MSSP for 2026 because of program changes. Losing a major insurer contract would hurt quickly. Margin-of-safety price: price alone is not enough, because the base case is below zero. The margin-of-safety price applies only after the business shows two consecutive full years of positive owner earnings. If that happens, the business would look roughly like the bull case, worth about $12 to $13 per share. Given the thin margins, dependence on a few insurers and Medicare rate risk, a margin of safety of about 60% is warranted, which gives a margin-of-safety price of $5.00 once that condition is met.