CNC Stock Study (9-18-25)

Posted by Mark on November 7, 2024 at 06:48 | Last modified: October 7, 2025 16:11

I recently did a stock study on Centene Corp. (CNC) with a closing price of $32.02. Previous studies are here and here.

M* writes:

     > Centene is a managed-care organization focused on government-
     > sponsored healthcare plans, including Medicaid, Medicare, and
     > the individual exchanges. Centene served 22 million medical
     > members as of Dec 2024, mostly in Medicaid (about 60% of
     > membership), the individual exchanges (about 20%), and
     > Medicare (about 5%). The company also has a military
     > contract and provides Medicare Part D pharmaceutical plans.

Over the past 10 years, the mega-size ( > $50B annual revenue) company has grown sales and earnings at annualized rates of 23.7% and 13.0%, respectively. Lines are somewhat up, straight, and parallel except for YOY EPS declines in ’18, ’20, ’21, and ’22. Ten- (Five-) year EPS R^2 is 0.65 (0.51), and Value Line gives an Earnings Predictability score of 90.

Over the past decade, PTPM trails peer and industry averages while falling from 3.1% (’15) to 2.6% (’24) with a last-5-year mean of 2.0%. ROE also trails peer and industry averages while falling from 17.0% (’15) to 11.5% (’24) with a last-5-year mean of 7.7%. Debt-to-Capital is about even with peer and industry averages while increasing from 36.1% (’15) to 42.4% (’24) with a last-5-year mean of 42.9%.

Value Line gives a B+ (was B++ one year ago) grade for Financial Strength. Quick Ratio is 1.1 and Interest Coverage is 5.0 per M* who assigns no Economic Moat (was “Narrow” one year ago), “Standard” Capital Allocation, and writes: “despite the company’s deleveraging after acquisitions in recent years, a near-term profit shock has put more pressure on CNC’s balance sheet, which has fallen back into the weak category from sound previously.”

With regard to sales growth:

• YF projects YOY 16.2% and flat for ’25 and ’26, respectively (based on 15 analysts).
• Zacks projects YOY 16.9% growth and 0.1% contraction for ’25 and ’26, respectively (8 analysts).
• Value Line projects 8.5% annualized growth from ’24-’29.
• CFRA projects growth of 8.9% YOY and 10.9% per year for ’25 and ’24-’26, respectively.
• In its analyst note, M* provides a 2-year ACE of 4.0% growth per year.

My 4.0% per year forecast is at bottom of the range.

With regard to EPS growth:

• MarketWatch projects 8.7% and 10.1% per year for ’24-’26 and ’24-’27, respectively (based on 22 analysts).
• Nasdaq.com projects 79.3% YOY and 61.2% per year for ’26 and ’25-’27 ( 9 / 9 / 5 analysts for ’25 / ’26 / ’27 ).
• Seeking Alpha projects 4-year annualized contraction of 11.9%.
• Argus projects 5-year annualized growth of 15.0%.
• YF projects YOY 77.4% contraction and 97.2% growth for ’25 and ’26, respectively (17).
• FINVIZ projects 5-year annualized contraction of 12.4% per year (8).
• Zacks projects YOY 77.1% contraction and 79.1% growth for ’25 and ’26 (9), along with 5-year growth of 15.0%/year.
• Value Line projects 7.0% annualized contraction from ’24-’29.
• CFRA projects contraction of 76.2% YOY and 15.9% per year for ’25 and ’24-’26 along with 3-year CAGR of 9.0%.
• M* projects long-term growth of [9.7% on BI website but only] 4.0% per year through ’28 in its analyst note.

I am forecasting flat long-term earnings: just below the mean (0.5%) of six long-term estimates. Initial value is ’24 EPS of $6.31/share rather than 2025 Q2 EPS of $4.04 (annualized).

My Forecast High P/E is 13.0. Over the past decade, high P/E falls from 28.7 in ’15 to 12.9 in ’24 with a last-5-year mean of 27.8 and a last-5-year-mean average P/E of 23.4. I am near bottom of the range (only ’24 is less).

My Forecast Low P/E is 5.0. Over the past decade, low P/E falls from 17.6 in ’15 to 8.7 in ’24 with a last-5-year mean of 19.1. I am forecasting below the range and current P/E of 7.9.

My Low Stock Price Forecast (LSPF) is $24.80. Default low price of $31.50 is less than 2.0% below previous closing price. I am therefore replacing the $6.31/share mentioned above with 2024 EPS of $4.95/share for my low EPS forecast. The resultant $24.80 is 22.5% less than the previous closing price and 1.2% less than the 52-week low.

These inputs land CNC in the BUY zone with a U/D ratio of 6.9. Total Annualized Return (TAR) is 20.7%.

PAR (using Forecast Average—not High—P/E) of 12.1% is pretty decent for a mega-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on the total annualized return (TAR) of 20.7% instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 20 studies (my study and 9 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E, are 4.7%, 6.3%, 14.9, and 7.5, respectively. I am lower across the board. Value Line’s projected average annual P/E of 10.0 is less than MS (11.2) and greater than mine (9.0).

MS high / low EPS are $7.92 / $5.25 versus my $6.31 / $4.95 (per share). My high EPS is less due to a lower growth rate (and probably low EPS being from ’24). Value Line’s $5.00 is less than both.

MS Low Stock Price Forecast (LSPF) of $26.70 implies Forecast Low P/E of 5.1: less than the above-stated 7.5. MS LSPF is 32.2% less than the default $5.25/share * 7.5 = $39.38 resulting in more conservative zoning. MS LSPF is still 7.7% greater than mine.

With regard to valuation, PEG is 1.3 per Zacks (undefined per my growth rate of zero): fairly valued. Relative Value [(current P/E) / 5-year-mean average P/E] is extremely low at 0.34.

MOS is robust because my inputs are near or below respective analyst/historical ranges and MS averages. That is further supported by an MS TAR that is 8.9% per year greater than my 20.7%.

I approach CNC with hesitation because of the current uncertainty. Corporate guidance for ’25 has been withdrawn. M* details many challenges being faced with government aims to cut Medicare funding, its low-[star ratings] quality medical insurance offerings, and loss of Narrow moat. Value Line and M* both indicate weakening financial strength. Value Line writes CNC “urgently needs to focus on restoring its earnings trajectory.” I do feel my inputs are conservative resulting a solid MOS but…

Per U/D, CNC is a BUY under $39.10/share. BI TAR criterion is met under $41/share given a forecast high price of $82 (no dividend).

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