WellCare Health Plans, Inc. (WCG - Free Report) offers a profitable investment opportunity, driven by steady earnings growth and solid prospects. Also, increasing demand for its Medicare and Medicaid business and improvement in medical cost ratios is expected to aid overall growth.
The company is also witnessing upward estimate revisions, reflecting analysts’ optimism surrounding its growth prospects. Over the last 60 days, the Zacks Consensus Estimate for 2018 has been raised nearly 0.9%. For 2019, the same upward revision in the Zacks Consensus Estimate was seen.
Further, this Zacks Rank #2 (Buy) stock has rallied 40.2% so far this year, outperforming 32.1% growth for the industry. The company looks all the more attractive compared with returns of 35.7%, 31% and 22% by UnitedHealth Group Inc. (UNH - Free Report) , Humana Inc. (HUM - Free Report) and Aetna Inc. (AET - Free Report) , respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
These are some of the fundamental factors that make Wellcare Health a solid investment option.
Earnings Growth: WellCare Health witnessed average earnings growth of 61.5% from 2015-2017. The earnings growth rate for 2018 and 2019 is anticipated to be 20.5% and 14.7%, respectively, ensuring continued momentum. Backed by strong first-quarter results, the company raised its 2018 earnings guidance. It expects adjusted earnings per share in the range of $10-$10.30, up from the previously guided $9.55-$9.85 range.
Also, WellCare Health has a decent earnings surprise history, having surpassed earnings estimates in each of the four reported quarters, with an average positive earnings surprise of 51.7%.
Further, the company’s long-term (three to five years) estimated EPS growth rate of 14.6%, greater than the industry’s earnings growth rate of 13.4%, promises rewards for investors.
Revenue Strength: WellCare Health has been witnessing consistent improvement in revenues for the past several years. From 2011-2017, the company’s revenues witnessed a CAGR of 6.8%. Revenues should further see an upside in 2018 driven by increasing premium, which is expected to be up 7% from 2017. The Zacks Consensus Estimate for revenues is 9.4% for 2018.
Acquisition Fueling Business Growth: WellCare Health has grown substantially through acquisitions and partnerships since 2013. Acquisitions of Care1st Arizona and Advicare have significantly contributed to Wellcare Health's Medicaid business and helped in diversifying its Medicaid portfolio. In 2017, WellCare Health completed the acquisition of Universal American Corp (driving 42% year-over-year growth in Medicare Health Plans premiums in the first quarter of 2018) and Arizona Medicaid assets of Phoenix Health Plan.
Recently, the company announced that it will acquire Meridian Health Plans of Michigan and Illinois and MeridianRx, a pharmacy benefit manager (PBM), which will bolster its Medicaid business and should add 40 to 50 cents to 2019 earnings.
Financial Strength: WellCare Health enjoys commendable liquidity backed by its robust cash position. Its cash flow from operating activities witnessed a remarkable four-year CAGR of 55.6% over 2013-2017. This high level of financial liquidity is likely to support the company's growth initiatives.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>