WellCare Health Plans, Inc. WCG appears a solid bet, riding high on organic strength and earnings growth prospects. The company’s inorganic growth strategies have also positioned it well for future progress.
Analysts seem to be optimistic about the company’s fundamentals as the stock has been witnessing upward estimate revisions. The stock has seen the Zacks Consensus Estimate for current-year earnings per share being revised 18.5% upward to $8.32 over the past 30 days. While for 2018, the consensus mark moved 7.7% south to $8.63 during the period.
Also last year, the stock has witnessed a whopping surge of 53%, substantially outperforming the industry’s growth of 38%.
Factors That Make the Stock Attractive
Solid Rank & VGM Score: WellCare sports a Zacks Rank #1 (Strong Buy) and has a VGM Score of A. Our research shows that stocks with a VGM Score of A or B combined with a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best investment opportunities for investors to pitch in their money. Thus, the company looks a compelling proposition at the moment.
Positive Earnings Surprise History: WellCare boasts an impressive earnings surprise history. The company has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 64.3%.
2017 Guidance Raise: Backed by strong third-quarter results, the company has raised its 2017 guidance. It expects adjusted earnings per share in the range of $8.25-$8.40 (previous guidance of $6.75-$6.95), up 53.7% over 2016. The company expects net investment income to lie within $56-$62 million (higher than the previous guidance of $40-$45 million), up 59% from 2016. This increased guidance instills investors’ optimism in the company’s ability to perform well in the coming quarters.
Revenue Strength: The top line of WellCare Health has been improving consistently since 2006. Over the past five years (2011-16), revenues have witnessed a CAGR of 18% on the back of its organic and inorganic growth strategies. Continuing the momentum, in the first nine months of 2017, revenues of $12.7 billion rose 18.7% year over year on the back of strong organic growth across all its three business lines and the company's acquisition of Care1st Arizona. For 2017, total adjusted premium revenues are expected in the band of $16.675-$16.925 billion, up 18% from 2016.
Steady Growth via Acquisitions: WellCare Health has grown substantially through acquisitions and partnerships since 2013. During 2016, the company acquired Care1st Arizona and Advicare that significantly contributed to Wellcare Health's Medicaid business and helped diversifying its Medicaid portfolio.
Recently, WellCare Health completed the acquisition of Universal American Corp and Arizona Medicaid assets of Phoenix Health Plan. These aggressive inorganic moves are anticipated to aid the company’s top and the bottom line significantly.
Strong Balance Sheet: The company enjoys a commendable liquidity, backed by its robust cash position. Its cash flow from the operating activities has been growing continuously since 2011. In 2016, net cash from operations was $748.3 billion, up 5% from the earlier year. Continuing the trend, net cash from operating activities was $1.2 billion in the first nine months of 2017, up 15.3% over the prior-year quarter. This high level of financial liquidity is likely to support the company's inorganic growth initiatives that have been the main revenue driver to date.
Other Stocks to Consider
A few other top-ranked stocks in the same space are Triple-S Management Corp. GTS, Centene Corp. CNC and The Joint Corp. JYNT. While Triple-S Management sports the same bullish Zacks Rank as Well Care, The Joint Corp. and Centene Corp. carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Triple-S Management pulled off positive surprises in two of the trailing four quarters with an average beat of 74%.
Centene delivered positive surprises in each of the last four quarters with an average beat of 10.6%.
The Joint Corp. beat estimates in three of the four reported quarters with an average positive surprise of 5.5%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
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
Be the first to comment