CNC - Valens Credit Report - 2022 05 09
Cash bond markets are overstating CNC's credit risk with a YTW of 5.050% relative to an Intrinsic YTW of 3.750%. Meanwhile, CDS markets are slightly overstating CNC's credit risk with a CDS of 140bps and Intrinsic CDS of 73bps. Finally, Moody's is overstating the firm's fundamental credit risk, with its non-investment grade Ba1 credit rating three notches lower than Valens' IG4+ (Baa1) credit rating.Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Management's compensation framework should drive them to focus heavily on margin expansion and revenue growth, which may lead to Uniform ROA improvement and higher cash flows available for servicing obligations. Meanwhile, management members are not well-compensated in a change-in-control scenario, indicating they are unlikely to pursue a sale or accept a buyout of the firm, limiting event risk. Furthermore, management members are material holders of CNC equity relative to their annual compensation, indicating they should be aligned with shareholders for long-term value creation
Earnings Call Forensics™ analysis of the firm's Q4 2021 (02/08) earnings call highlights that management generated an excitement marker when saying teledigital and telemarketing channels continue to make up half their sales. In addition, they are confident their call center standardization initiative will offer more convenient ways for members to interact with the company.
Centene is an insurance holding company. The company's Managed Care segment provides health plan coverage to individuals through government subsidized programs. The company also provides a variety of individual, small group, and large group commercial healthcare products, both to employers and directly to members in the Managed Care segment. The company's Specialty Services segment consists of the company's specialty companies prviding healthcare services and products to state programs, correctional facilities, healthcare organizations, employer groups and other commercial organizations, as well as to its own subsidiaries. The Specialty Service segment also includes the Government Contracts business.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.