On Jul 5, Centene Corp.’s (CNC - Free Report) shares hit a 52 week high of $128.02, ending the day a tad lower at $128.00.
Recent positive developments, which includes the completion of Fidelis Care acquisition, securing New Hampshire Department of Corrections contract and other buyouts, seems to have spurred the stock.
In a year’s time, the stock has gained a significant 57.5% compared with the industry’s growth of 28.5%. In fact, its performance looks more illustrious when compared with others in the space such as UnitedHealth Group Inc. (UNH - Free Report) , Humana Inc. (HUM - Free Report) and Anthem Inc. (ANTM - Free Report) , which have registered gains of 33.3%, 28.5% and 25.3%, respectively.
What’s Behind the Rally?
The Fidelis Care buyout is a catalyst for Centene as the acquisition would poise the company well in the country’s four largest states. It will also aid expansion in Medicare Advantage and Exchanges.
Recent Medicaid contracts in five states of Arizona, New Mexico, Iowa, Florida and Washington will bolster the company’s revenues.
The recent acquisition of MHM Services positions the company well in the rapidly growing business managing benefits for correctional facilities. The company’s correctional health plans business has grown over the past year and the deal will expand its correctional presence to six states.
Also last month the company’s subsidiary Centurion of New Hampshire was re-approved a contract for continuing the provision of medical and dental professionals to the New Hampshire Department of Corrections.
In March, Centene completed the acquisition of Community Medical Group (CMG), which highlights its targeted approach toward vertical integration in healthcare. In addition to CMG’s primary care services, its specialty care, transportation and a suite of social and other support services is likely to enhance Centene’s service portfolio.
In the same month, Centene made an equity investment in RX Advance, a full-service pharmacy benefits manager. The company expects to utilize RX Advance’s cloud-based technology platform to significantly reduce administrative cost and affordable drug-impacted medical cost.
The company also acquired an additional 61% investment in Interpreta in March. It is an innovative health IT company focused on clinical and genomic data, as well as real-time analytics. These deals will help the company in developing its PB business, consequently aiding in savings by significantly reducing both administrative and drug impacted medical costs.
Will the Momentum Stay?
The company’s re-procurement wins, expansion into new markets, and future growth pipeline will drive its long-term growth. Moreover, the diversification into other businesses such as advisory services, data analytics, forging government partnerships in new markets positions the company for strong growth ahead.
There seems to be no hindrance in the stock’s growth trajectory at the moment. Moreover, the stock looks attractively valued with a PEG ratio of 1.1 comparing favorably with the industry’s PEG ratio of 1.4.
Centene carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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