Here's Why You Should Retain Cigna (CI) in Your Portfolio
Cigna Corporation CI is well-poised for growth backed by improving revenues, several buyouts, rise in membership in its Medicare Advantage business and a solid financial position.
Zacks Rank & Price Performance
Presently, Cigna carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past six months, the stock has rallied 41.5% outperforming the industry’s growth of 15.1%.
Style Score
The company is well-poised for progress, as evident from its favorable VGM Score of A. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
It has an impressive Growth Score of B, which reinstates the growth prospects of a company.
Solid Prospects
The Zacks Consensus Estimate for the company’s 2021 earnings indicate growth of 9.9% from the year-ago reported figure. The consensus estimate for 2021 revenues suggest an improvement of 3.5% from the prior-year quarter.
Earnings Surprise History
Cigna surpassed estimates in three of the last four reported quarters and missed once, with the average surprise being 5.09%.
Valuation
Price-to-earnings (P/E) is one of the multiples used for valuing healthcare stocks. Compared with the health maintenance organization's industry trailing 12-month P/E ratio of 19.6, Cigna has a reading of 13.1. It is quite evident that the stock is currently undervalued.
Business Tailwinds
Being one of the leading global health services company, Cigna remains well-poised to benefit through its three growth platforms — Evernorth, U.S. Medical and International Markets. Through these platforms, the company’s total U.S. addressable market is likely to more than double over the next five years. Over a decade, it has maintained a track record of reporting average annual adjusted EPS growth higher than the long-term target of 10% to 13%.
The company continues to roll out innovative pharmacy solutions at lower costs, which tends to improve health outcomes across the communities it serves. This, in turn, has been providing a boost to the company’s pharmacy revenues. Higher premiums have been stemming from product expansion and growing customer base across Commercial and Medicare Advantage businesses.
With average annual customer growth in Medicare Advantage expected in the range of 10-15% through 2025, the company intends to serve 50% of Medicare eligibles within the same time frame. Having said that, the company keeps on exploring newer opportunities in international markets of Middle East and Australia.
Moreover, the company boasts of an impressive inorganic growth record through prudent buyouts. The buyout of MDLIVE by the Cigna unit Evernorth last month is a testament to the company’s efforts to boost shares in the growing teleheath market. Other healthcare providers such as Humana Inc. HUM, UnitedHealth Group Incorporated UNH and Teladoc Health, Inc. TDOC have also been developing their telehealth services.
Coming back, the abovementioned initiatives have been fueling the top line growth of Cigna. Adjusted revenues are expected to be at least $165 billion in 2021, which indicates 3.1% growth from 2020 reported number. On a long-term basis, the company estimates average annual adjusted revenue growth of 6% to 8%.
Furthermore, robust cash flows have empowered the company to not only pursue growth-related initiatives such as buyouts and collaborations but also return capital to its shareholders through share buybacks and dividend payments.
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