U.S. Markets closed

Why WellCare (WCG) Stock Should Be in Your Portfolio Now

Zacks Equity Research

Leading managed care company WellCare Health Plans, Inc.’s WCG business strategies should continue to support growth. The company has been strengthening its revenue base consistently over the last 10 years. The Affordable Care Act (ACA) implemented by former U.S. President Barrack Obama also contributed significantly to the company’s top-line growth.

However, things might change for Wellcare as the ACA is likely to be replaced by American Healthcare Act (AHCA) under the Trump administration. The new act might lead to a steep decline in Medicaid programs enrollment.

In spite of regulatory uncertainty raising concers for WellCare, it  remains an attractive pick for investors. Let’s delve deeper to find out why.

Favorable Share Price Movement

Shares of WellCare have been performing well. Year to date, the stock has gained 26.2%, while the Zacks categorized Health Maintenance Organization (HMO) industry registered 15.2% increase. This clearly reflects the company’s business strength.

Revenue Growth

 WellCare’s consistent revenue growth has been supported by strategic acquisitions, partnerships and alliances over the last three years. These initiatives have not only bolstered the company’s presence in existing markets but also expanded its operations geographically. Since 2011, revenues have increased at a four-year CAGR of 22.5%. In the first quarter of 2017, adjusted total premium revenue of $3.95 billion increased 13.5% year over year due to strong organic growth across all three lines of business and the company's acquisition of Care1st Arizona

Fundamental Growth

The company’s healthy balance sheet, mainly supported by its substantial cash inflow, has helped it increase shareholders’ value through several capital deployment initiatives. In the first quarter, net cash from operating activities was $394.5 million compared with $111.4 million in the prior-year quarter. The improvement was primarily driven by the advanced timing of Medicare-related receipts.

Inorganic Growth

WellCare has grown substantially in the last three years through acquisitions, partnerships and alliances. During 2016, the company acquired Care1st Arizona and Advicare, which contributed to its Medicaid business growth. In Apr 2017, WellCare completed the buyout of Universal American Corp. and teamed up with Catholic Health.

Strong  Performance in Previous Quarters

The company delivered positive earnings surprises in the last four quarters with an average beat of 59.23%. In the last reported first quarter, the company’s adjusted operating earnings of $1.61 per share surpassed the Zacks Consensus Estimate by 35.3%. Earnings also surged 52% year over year, primarily due to continued operational execution as evidenced by strong results across all business lines.estimate revision if positive then mention

Zacks Rank & Other Stocks to Consider

Wellcare presently sports a Zacks Rank #1 (Strong Buy). Other top-ranked stocks from the same space include Align Technology, Inc. ALGN, Nobilis Health Corp. HLTH and Inogen Inc. INGN. All of the stocks flaunt a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Align Technology,  a medical dental supplies company, topped estimates in all of the last four quarters with an average beat of 59.23%.

Nobilis Health, an HMO behemoth, surpassed expectations in two of the last four quarters with an average positive surprise of 100.2%

Inogen is a medical instruments seller that delivered positive surprises in all of the last four quarters with an average beat of 82.42%.

Looking for Ideas with Even Greater Upside?

Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Click for Free Inogen, Inc (INGN) Stock Analysis Report >>
Click for Free WellCare Health Plans, Inc. (WCG) Stock Analysis Report >>
Click for Free Nobilis Health Corp. (HLTH) Stock Analysis Report >>
Click for Free Align Technology, Inc. (ALGN) Stock Analysis Report >>
To read this article on Zacks.com click here.
Zacks Investment Research