Ci Stocks – Low-asset, cash-rich companies can be excellent portfolio substitutes, especially for their earnings and overall return prospects. Many insurance companies are now trading in the value space again as the market seems to be chasing high growth companies.
This brings me to Cigna ( NYSE:CI ), which I last covered last July. The stock has risen to $340 before returning to the $265 I suggested last year. In this article, I provide an update and discuss why the stock is currently a bargain for total return investors.
Cigna is an S&P 500 company (SPY) and one of the largest health insurers in the world. It currently has over 165 million customer relationships and operates in over 30 countries worldwide. In the past 12 months, CI’s total revenue reached $183 billion. As the chart below shows, the company’s revenue has increased over the past 10 years, including following the acquisition of Express Scripts in recent years.
Nio Q1 Earnings Preview: Where Next For Nio Stock?
CI benefited from a strong labor market, as reflected in first quarter revenue growth of 6% year over year. That was partly driven by strong 8% revenue growth at Evernorth Health Services, CI’s pharmacy benefits manager, formerly Express Scripts.
A key driver of PBM growth is the rise of biosimilars on the market, such as AbbVie’s ( ABBV ) previously No. 1 drug, Humira. Biosimilars cost less than generic drugs, so PBMs like Evernorth have lower acquisition costs.
Also encouraging was medical membership growth of 10% year-over-year and an improvement in the medical expense ratio, which means medical spending as a percentage of premiums has declined.
Looking ahead, CI has many avenues for growth, and its Medicare Advantage business offers the highest market growth. Given the rapid growth of the over-65 population (the fastest growing age group in the U.S.), CI is likely to see significant growth in this segment of the business even with increased market growth rates. .
Ci Financial (cix) To Split Us, Canada Units With Debt Concerns Rising
Additionally, the growing number of specialty drugs such as Eli Lilly’s ( LLY ) weight-loss Ozempic, and the potential global Alzheimer’s market to reach $14 billion, bode well for Evernorth’s future, as specialty drugs contribute market. 40% of departmental revenue. Management also identified Evernorth Care as one of its most important long-term growth opportunities due to increasing demand for virtual and behavioral health services.
At the same time, management has a clear medium-term capital allocation strategy. This includes maintaining a debt-to-equity ratio of 40%, which should support its stable A- credit rating.
Management also expects to use 20% of operating cash flow to fund growth, with the remaining 80% going to dividends, debt repayments, share buybacks and strategic acquisitions. As you can see below, since acquiring Express Notes, CI has repurchased 18 percent of its outstanding shares in the last 3 years alone.
Although CI currently only yields 1.9%, the dividend is well paid with a payout ratio of 20%. Management has also shown interest in increasing its dividend significantly in recent years, reflected in a 10% increase earlier this year.
Ci Financial’s Us Deal Spree Gets A Cold Shoulder From Investors
In conclusion, I think CI is a good value stock with a current price of $265.88 and a forward P/E ratio of just 10.7. That means managers earned 9.3% for every dollar spent on share buybacks. CI is also currently valued below its normal P/E ratio of 12.3, as shown below.
For the reasons mentioned above, this valuation looks very cheap for a company that can grow annual revenue by around 10% in the medium term. That’s below analysts’ forecasts of a range of 9% to 14% between 2024 and 2026. Given CI’s relative underperformance relative to historical levels and its future growth prospects, the stock could easily deliver annual returns of double digits over the next few years, with an average price target of $329.
Cigna appears to be a good long-term total return option in today’s market, especially since it is undervalued compared to historical norms. Not only does Cigna offer strong revenue growth potential from its PBM and insurance segments, but it also has a strong capital allocation policy, including business reinvestments, dividends and share buybacks, which is very attractive at current reduced levels. . Therefore, investors looking for value and growth should take a hard look at CI’s current price.
Gen Alpha is partnering with Hoya Capital to launch premium income-focused investment services on Seeking Alpha. Members get early access to our articles, including a unique income-oriented model portfolio and a full suite of tools and models to help build sustainable portfolio income, targeting premium dividend yields of up to 10%.
Charts On Value Versus Growth Stocks In The Third Quarter
Whether you’re aiming for high yield or dividend growth, we can provide you with actionable investment research that highlights the exact types of income-producing assets, offering diversification potential, monthly income, capital appreciation and inflation protection. Start a 2-week free trial now!
I am a financial writer based in the US and have an MBA in finance. I have over 15 years of investment experience and typically focus on more defensive stocks with a medium to long term horizon. My goal is to share useful and insightful knowledge and analysis with my readers. Contributing author of Hoya Capital Income Builder.
Analyst Disclosure: I/We do not hold equity, option or similar positions in any of the above companies and have no plans to initiate such positions within the next 72 hours. This article was written by myself and expresses my own opinion. I received no compensation (except from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
I am not an investment advisor. This article is for informational purposes only and does not constitute financial advice. Readers are encouraged and expected to conduct due diligence and reach their own conclusions before making any investment decisions.
The Pandemic Economy: Which Stocks Are Weathering The Storm?
Seeking Alpha Solutions: Past performance is no guarantee of future results. No advice or recommendation is given as to whether any investment is suitable for a particular investor. Any views or opinions stated above may not reflect the views of Seeking Alpha as a whole. Seeking Alpha is not an authorized securities dealer, broker or US investment adviser or investment bank. Our analysts are third-party authors, including professional investors and individual investors, who may not be licensed or certified by any institutional or regulatory authority.
If you have an ad blocker turned on, you may be prevented from continuing. Please turn off your ad blocker and try again. Health plan shares fell sharply Thursday after pharmacy benefits and health insurance provider Cigna Corporation ( CI ) doubled down on the estimated impact of COVID-19 on its full-year results. The company surprised investors by saying it now expects the explosion to cut earnings by $2.50 per share, up from its previous forecast of $1.25 per share. However, Cigna confirmed its annual adjusted earnings per share (EPS) is at least $20.20.
The good news is that the Bloomfield, Connecticut-based company beat Wall Street’s quarterly earnings and profit expectations, posting adjusted second-quarter earnings of $5.24 a share on revenue of $43.1 billion. Analysts had questioned expected earnings of $4.96 per share on sales of $41.19 billion. Additionally, the company’s total customer relationships and total pharmacy customers grew 3.6% and 5%, respectively, as of June 30. Cigna stock, with a market capitalization of $70.65 billion as of Thursday’s close and yield of 1.73% dividend, has lost nearly 20% in the past three months and is 12% below the multi-line health insurance industry average over the same period.
Shares of Cigna fell below the high line established by the 200-day moving average (SMA) significantly following yesterday’s earnings report, signaling more near-term weakness. However, traders should expect the stock to stabilize around $194, which is supported by a pattern connecting various peaks and troughs over the past 20 months. Additionally, the relative strength index (RSI) has moved deeper into oversold territory, raising the possibility of a pullback to the upside at key chart support.
Continuous Integration Images, Stock Photos & Vectors
The Relative Strength Index (RSI) is a momentum indicator that measures the magnitude of recent price changes to assess whether the price of a stock or other asset is overbought or oversold.
Anthem, Inc. (ANTM), one of Cigna’s main rivals, also fell after rivals became cautious about the impact of the pandemic. Below, we take a closer look at the stock and identify key chart levels to watch.
Anthem provides health insurance and medical benefits to approximately 44 million medical members, offering employer, individual and government sponsored insurance plans. The $91.48 billion company also recently issued a warning about rising COVID-19 costs, posting quarterly earnings of $7.03 per share, beating analysts’ estimates of $6.34 per share. Management said the better-than-expected results were due to higher sales and stronger Medicare and Medicaid operations. In particular, the state’s share of health insurance grew 16.4% from a year ago, helping to increase
Ci *, cmdb ci, best ci, circle ci, devops ci, mobile ci, travis ci, salesforce ci, ci, free ci, build ci, harness ci