Briefing From The Editor -- CNC Stock

Now trading at a price of $67.91, Centene has moved -0.5% so far today.

Centene returned losses of -16.0% last year, with its stock price reaching a high of $87.84 and a low of $60.83. Over the same period, the stock underperformed the S&P 500 index by -29.0%. As of April 2023, the company's 50-day average price was $66.42. Centene Corporation operates as a healthcare enterprise that provides programs and services to under-insured and uninsured families, commercial organizations, and military families in the United States. Based in Saint Louis, MO, the large-cap Health Care company has 74,300 full time employees. Centene has not offered a dividend during the last year.

Overview of the Company's Finances:

2018-02-20 2019-02-19 2020-02-18 2021-02-22 2022-02-22 2023-02-21
Revenue (MM) $48,382 $60,116 $74,639 $111,115 $125,982 $144,547
Operating Margins 2% 2% 3% 3% 3% 3%
Net Margins 2.0% 1.0% 2.0% 2.0% 1.0% 1.0%
Net Income (MM) $828 $900 $1,321 $1,808 $1,347 $1,202
Net Interest Expense (MM) -$255 -$343 -$412 -$728 -$665 -$665
Depreciation & Amort. (MM) -$361 -$495 -$643 -$1,259 -$1,476 -$1,553
Earnings Per Share $2.34 $2.26 $3.14 $3.12 $2.28 $2.07
EPS Growth n/a -3.42% 38.94% -0.64% -26.92% -9.21%
Diluted Shares (MM) 353 399 420 579 591 582
Free Cash Flow (MM) $1,911 $1,909 $2,213 $6,372 $5,115 $7,265
Capital Expenditures (MM) -$422 -$675 -$730 -$869 -$910 -$1,004
Net Current Assets (MM) -$6,276 -$7,880 -$7,979 -$19,364 -$22,856 -$22,505
Long Term Debt (MM) $4,695 $6,648 $13,638 $16,682 $18,571 $17,938
Net Debt / EBITDA 0.06 0.32 0.27 1.0 0.88 0.7

Centene has weak revenue growth and a flat capital expenditure trend, weak operating margings with a stable trend, and irregular cash flows. In addition, we note just enough current assets to cover current liabilities. We also note that the company benefits from a strong EPS growth trend and healthy leverage. Furthermore, Centene's financial statements do not display any obvious red flags.

A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:

Centene has a trailing twelve month P/E ratio of 13.8, compared to an average of 24.45 for the Health Care sector. Based on its EPS guidance of $6.7, the company has a forward P/E ratio of 9.9. The company doesn't provide forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is 12.7%. On this basis, Centene's PEG ratio is 1.09. Using instead the 9.2% weighted average of Centene's earnings CAGR and the broader market's anticipated 5-year EPS growth rate, the company's PEG ratio is 1.51, which suggests that its shares may be overpriced. In contrast, the market is likely undervaluing Centene in terms of its equity because its P/B ratio is 1.44 while the sector average is 4.16. The company's shares are currently trading 54.2% above their Graham number.

Centene Has an Average Rating of Buy:

The 17 analysts following Centene have set target prices ranging from $71.0 to $110.0 per share, for an average of $81.82 with a buy rating. As of April 2023, the company is trading -18.8% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Centene has a very low short interest because 1.3% of the company's shares are sold short. Institutions own 97.2% of the company's shares, and the insider ownership rate stands at 0.65%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 12% stake in the company is worth $4,328,471,378.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.