Time To Buy Centene Stock?
Centene (NYSE:CNC) recently reported a surprise loss of $0.16 per share for Q2, significantly missing analyst expectations of $0.23 per share. This downturn is primarily attributed to a continued increase in medical costs for government-backed insurance plans, evidenced by a 540 basis point year-over-year surge in its health benefit ratio to 93% in Q2.
Despite these disappointing results, CNC stock rose 6% on Friday, July 25. This positive market reaction followed management's optimistic forecast for a much-improved performance in 2026.
Even with Friday's gain, CNC stock remains down over 50% year-to-date, largely due to ongoing concerns about rising medical costs. While Centene certainly appears to be a risky investment given its recent performance, we believe it presents a compelling buying opportunity at its current price of around $28, primarily due to its very low valuation.
Our conclusion is based on a comprehensive analysis comparing CNC's current valuation with its operational performance in recent years and its historical and current financial health. Our assessment of Centene across key parameters—Growth, Profitability, Financial Stability, and Downturn Resilience—indicates a moderate overall operating performance and financial condition.
However, for investors who seek lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative - having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How Does Centene's Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, CNC stock looks cheap compared to the broader market.
How Have Centene's Revenues Grown Over Recent Years?
Centene's Revenues have seen notable growth over recent years.
How Profitable Is Centene?
Centene's profit margins are considerably worse than most companies in the Trefis coverage universe.
Does Centene Look Financially Stable?
Centene's balance sheet looks weak.
How Resilient Is CNC Stock During A Downturn?
CNC stock has seen an impact that was slightly better than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on CNC stock? Our dashboard – CNC Fell 50% In A Month. Past Crashes Went Deeper – has a detailed analysis of how the stock performed during and after previous market crashes.
Putting All The Pieces Together: What It Means For CNC Stock
In summary, Centene's performance across the parameters detailed above are as follows: While Centene has demonstrated a moderate performance across our key analytical parameters, its current valuation of 0.1x revenues is particularly attractive.
We could be wrong in our assessment and investors might continue to assign a low valuation multiple to Centene due to ongoing concerns about rising medical costs. However, for investors with a 3-5 year investment horizon, we believe CNC stock offers a compelling entry point. Furthermore, the average analyst price target of $44 suggests a significant upside of over 55% from its current levels.
While CNC stock looks promising, investing in a single stock can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
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