Centene Stock To $44?

Centene (CNC) stock has fallen 8.8% during the past day, and is currently trading at $34.25. Our multi-factor assessment suggests that it may be time to buy more shares of CNC stock. We have, overall, a positive view of the stock, and a price of $44 may not be out of reach. We believe there are a few things to fear in CNC stock given its overall Moderate operating performance and financial condition. Taken together with its Very Low valuation, this makes the stock look Attractive.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $17 Bil in market cap, Centene provides health plan coverage and healthcare services to under-insured and uninsured individuals through government programs and commercial products for individuals and employers.

[1] Valuation Looks Very Low

This table highlights how CNC is valued vs broader market. For more details see: CNC Valuation Ratios

[2] Growth Is Strong

• Centene has seen its top line grow at an average rate of 9.6% over the last 3 years
• Its revenues have grown 15% from $162 Bil to $186 Bil in the last 12 months
• Also, its quarterly revenues grew 18.2% to $50 Bil in the most recent quarter from $42 Bil a year ago.

This table highlights how CNC is growing vs broader market. For more details see: CNC Revenue Comparison

[3] Profitability Appears Very Weak

• CNC last 12 month operating income was $1.1 Bil representing operating margin of 0.6%
• With cash flow margin of 2.2%, it generated nearly $4.1 Bil in operating cash flow over this period
• For the same period, CNC generated nearly $-5.3 Bil in net income, suggesting net margin of about -2.8%

This table highlights how CNC profitability vs broader market. For more details see: CNC Operating Income Comparison

[4] Financial Stability Looks Moderate

• CNC Debt was $18 Bil at the end of the most recent quarter, while its current Market Cap is $17 Bil. This implies Debt-to-Equity Ratio of 104.6%
• CNC Cash (including cash equivalents) makes up $19 Bil of $82 Bil in total Assets. This yields a Cash-to-Assets Ratio of 23.4%

[5] Downturn Resilience Is Moderate

CNC saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• CNC stock fell 37.0% from a high of $97.22 on 15 August 2022 to $61.27 on 1 September 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $80.41 on 27 February 2024 , and currently trades at $34.25

 
2020 Covid Pandemic

• CNC stock fell 33.0% from a high of $68.02 on 23 January 2020 to $45.55 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 15 April 2020

 
2008 Global Financial Crisis

• CNC stock fell 53.2% from a high of $7.10 on 8 January 2008 to $3.33 on 14 April 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 14 January 2011

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read CNC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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