Valens Equity Weekly Insights - 2024 03 12
Centene (CNC) is the largest managed health care provider for Medicaid and one of the top providers for Medicare as well with over 26 million members across all of its services. Uniform Accounting highlights that the market is overly pessimistic given exaggerated fears surrounding government spending, suggesting the potential for equity upside.Centene is one of the largest managed care organizations (“MCO”) in the United States. The company provides healthcare services to nearly one in 15 people in the United States through the government-sponsored programs Medicare and Medicaid. The company's savvy acquisition strategy and constant vigilance towards cost management has propelled it to a leadership position in its industry with stable returns. Since 2011, Uniform ROA has ranged between 11% and 17%, with ROA marking the top of this range at 17% in 2023. As the U.S. government continues funding Medicare and Medicaid, Centene should be able to maintain its returns, yet the market is pricing returns to collapse.
Centene's management is closely aligned to focus on growth, quality, and cost management, which should push management to maintain its leadership position in the MCO industry.
Management confidence in the Q4 earnings call about efficiency improvements suggest reason to believe momentum will remain strong.
CNC
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.
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