Centene Corporation: A Good Buying Opportunity

| About: Centene Corporation (CNC)

We like Centene Corp (NYSE:CNC) based on their strong earnings and sales growth over the past twelve months.

The stock has shown strong price momentum since their April lows and has been up 22% over the past three months. Growth in earnings and sales over the past twelve months has been 115% and 33% respectively, both very high numbers.

In addition, in their most recent quarterly report, CNC beat earnings estimates and raised sales guidance for the remainder of the year. We would expect that demand for CNC services would continue to be strong in Medicaid and Medicaid related health plan services, as well as in their specialty services segment.

Changing demographics with an aging population should help this company maintain strong long term prospects. The company currently has one of the lowest gross margins in the industry, not too surprising given the focus on government organizations and programs which tend to be more cost conscious.

Nonetheless, the company may be able to expand margins over time as a result of growing demand, and if that happens, we will see even more upside in the stock price.

The stock price took a major dive at the start of the year through April, but has since started to recover. We think the market overreacted in the first quarter, and think the stock shows significant upside potential. Over the past 3 weeks, the stock price has been consolidating in the $22-$24 range, which we now consider to be a very good buying opportunity.

Disclosure: MarketBeatingStocks is currently long CNC at the time of this writing