Cash Machine Trading Cheap – Centene Stock Set to Run?
We think Centene (CNC) stock is worth a look: It is growing, producing cash, and available at a significant valuation discount. Companies like this can use cash to fuel additional revenue growth or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market.
CNC stock trades at a substantial discount to its multi-year highs as the company executes a transitional “margin over membership” pivot. Management projects total 2026 revenue to decline to a range of $186.5B – $190.5B, a contraction driven by the conclusion of Medicaid redeterminations and a strategic pricing shift within the ACA Marketplace. By utilizing aggressive premium adjustments and portfolio rationalization, Centene is intentionally prioritizing underwriting margins over enrollment volume to secure sustainable, long-term earnings growth
CNC Has Strong Fundamentals
- Cash Yield: Centene offers an impressive cash flow yield of 26.9%.
- Valuation Discount: CNC stock is currently trading at 31% below its 3-month high, 49% below its 1-year high, and 59% below its 2-year high.
Below is a quick comparison of CNC fundamentals with S&P medians.
- NVIDIA Stock on the Edge: 3 Threats You Need to Know
- Cash Machine Trading Cheap – RH Stock Set to Run?
- Deere Stock Pays Out $26 Bil – Investors Take Note
- Applied Materials Stock Pays Out $27 Bil – Investors Take Note
- Netflix Stock Hits Key Support – Buying Opportunity?
- Intuit Stock Pulls Back to Support – Smart Entry?
| CNC | S&P Median | |
|---|---|---|
| Sector | Health Care | – |
| Industry | Managed Health Care | – |
| Free Cash Flow Yield | 26.9% | 4.3% |
| Revenue Growth LTM | 19.4% | 6.7% |
| Operating Margin LTM | -0.2% | 18.6% |
| PS Ratio | 0.1 | 3.2 |
| PE Ratio | -2.4 | 23.9 |
| Discount vs 3-Month High | -30.7% | -12.9% |
| Discount vs 1-Year High | -49.1% | -15.4% |
| Discount vs 2-Year High | -59.2% | -17.4% |
*LTM: Last Twelve Months
But What About The Risk Involved?
While CNC stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. CNC slipped about 53% during the Global Financial Crisis, pulled back 42% in the 2018 correction, and dropped 37% amid the inflation shock. Even the Covid pandemic caused a 33% dip. So despite all the good stuff supporting this stock, when the market turns, CNC can still take a pretty serious hit. Quality and fundamentals matter, but risk remains real in turbulent times. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read CNC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
If you want to see more details, read Buy or Sell CNC Stock.
Other Stocks Like CNC
Not ready to act on CNC? You could consider these alternatives:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Positive revenue growth
- High free cash flow yield
- Meaningful discount to 3M, 1Y, and 2Y highs
A portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have performed as follows:
- Average 6-month and 12-month forward returns of 25.7% and 57.9% respectively
- Win rate (percentage of picks returning positive) of >70% for both 6-month and 12-month periods
Portfolios Over Individual Stock Picks
Individual stocks are unpredictable. A smart portfolio helps you invest, limits downside shocks, and provides upside exposure.
Why settle for average market returns? The Trefis High Quality (HQ) Portfolio invests in a diverse group of 30 stocks that have collectively delivered stronger upside with reduced volatility compared to the broader indices. Discover the methodology behind these smoother, higher returns by checking the HQ Portfolio performance data.