Key statistics: NYSE: CNC
Closing share price 21.08.18: $143.80
52-week high: $145.38
52-week low: $83.43
Most recent dividend: –
Annual dividend yield: –
Just as Australians are re-thinking their healthcare insurance, a once unknown company in the US is reaping healthy profits from its medical and health-care related services.
Centene Corp may be not as familiar to most Australians Medibank or HCF, but in the US where the cost of healthcare has been a major concern for many residents, this publicly listed Fortune 500 company has more than 12 million members in government sponsored healthcare programs. This huge membership number is one the big factors behind Centene’s impressive growth.
Over the past decade its stock price has increased by a factor of 16, with a tripling in price in just the last two years alone. Since 2014 annual revenue has climbed from $10.9 billion to more than $40 billion, and net income has swelled more than threefold, despite thin margins according to the company’s financial reports.
A modest corrective dip in the upward trend saw the stock trading around the $US100 level in February this year. Since then, steady gains have seen prices probe all-time highs above the $US140 mark.
A significant factor behind Centene’s growth is the Affordable Care Act (ACA – also known as Obamacare). This gives government subsidies to even the poorest Americans who need medical and health cover. Under the ACA, it is illegal to refuse medical insurance coverage to people with pre-existing physical or mental conditions.
Unlike other health insurers that jumped into the government-backed scheme earlier, Centene took a slow and gradual approach. It focused on a small number of areas first to learn more about the market. In some of the regions in which it operates, other providers have since pulled out, leaving Centene as the sole provider of ACA benefits. Centene has been richly rewarded and membership numbers continue to grow.
In a recent interview, Centene CEO said his biggest challenge these days is finding office space for the company’s growing staff contingent. The company is still in hiring mode despite having more than 31,000 employees across the US. The CEO said he needs more people to handle new business.
With a track record of more than a decade in providing healthcare insurance to state-sponsored and employer-sponsored programs, Centene has also had time to develop its own software tool – TruCare – which analyses customer data to generate patient to-do lists. This serves as a preventative healthcare tool that is updated every 24 hours.
According to Centene this technology has allowed them to identify which patients would need to visit a doctor immediately or would require other preventative care. Centene’s management said the software has helped them to identify those who appear most likely to suffer such costly conditions as diabetes and cardiovascular disease and intervene before small problems become big ones.
As more and more Americans welcome the benefits of the Obamacare and as Centene continues to reap the benefits of its efficient operations and use of technology, Centene shares look set for more healthy returns in the years to come. Despite possible threats that political manoeuvring may put a stop to some aspects of the Obamacare program, Centene Corp is well-placed to grow its membership number and boost its profitability.
If you are looking to include a healthcare stock in your portfolio and would like to diversify away from the ASX-listed companies, it may be worth considering Centene Corp.