Have you been paying attention to shares of WellCare Health Plans (WCG - Free Report) ? Shares have been on the move with the stock up 7.4% over the past month. WCG hit a new 52-week high of $232.04 in the previous session. WellCare Health Plans has gained 12.9% since the start of the year compared to the -0.4% move for the Medical sector and the 9% year-to-date return for its peer group.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on May 1, 2018, WellCare Health Plans reported EPS of $2.47 versus the Zacks Consensus Estimate of $1.95 while it missed the consensus revenue estimate by 0.39%.
For the current fiscal year, WellCare Health Plans is expected to post earnings of $10.25 per share on $18.57 billion in revenues. This represents a 20.31% change in EPS on a 9.19% change in revenues. For the next fiscal year, the company is expected to earn $12.05 per share on $20.33 billion in revenues. This represents a year-over-year change of 17.58% and 9.47%, respectively.
WellCare Health Plans may be at a 52-week high right now, but what might the future hold for WCG? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
WellCare Health Plans has a Value Score of A. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 22.1X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 20.1X versus its peer group's average of 14.4X. Additionally, the stock has a PEG ratio of 1.52. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, WellCare Health Plans currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 or 2 (Buy) and Style Scores of A or B, it looks as if WellCare Health Plans passes the test. Thus, it seems as though WCG shares could still be poised for more gains ahead.