Intrinsic value of Centene - CNC

Previous Close

$82.87

  Intrinsic Value

$1,100

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

+704%

Previous close

$82.87

 
Intrinsic value

$1,100

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

+704%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CNC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 14.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  78.41
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  0
  64,971
  100,381
  150,119
  217,815
  307,306
  422,475
  567,084
  744,618
  958,142
  1,210,211
  1,502,808
  1,837,327
  2,214,596
  2,634,932
  3,098,212
  3,603,965
  4,151,465
  4,739,830
  5,368,104
  6,035,342
  6,740,676
  7,483,366
  8,262,852
  9,078,776
  9,931,015
  10,819,686
  11,745,158
  12,708,054
  13,709,247
  14,749,857
Variable operating expenses, $m
 
  62,674
  96,575
  144,195
  209,007
  294,684
  404,947
  543,396
  713,365
  917,793
  1,159,123
  1,438,782
  1,759,049
  2,120,246
  2,522,674
  2,966,216
  3,450,422
  3,974,597
  4,537,894
  5,139,402
  5,778,213
  6,453,496
  7,164,545
  7,910,822
  8,691,985
  9,507,915
  10,358,725
  11,244,768
  12,166,641
  13,125,179
  14,121,455
Fixed operating expenses, $m
 
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
Total operating expenses, $m
  39,347
  62,677
  96,578
  144,198
  209,010
  294,687
  404,950
  543,400
  713,369
  917,797
  1,159,127
  1,438,786
  1,759,053
  2,120,250
  2,522,678
  2,966,220
  3,450,426
  3,974,602
  4,537,899
  5,139,407
  5,778,218
  6,453,501
  7,164,550
  7,910,827
  8,691,990
  9,507,921
  10,358,731
  11,244,774
  12,166,647
  13,125,185
  14,121,461
Operating income, $m
  1,260
  2,294
  3,802
  5,921
  8,805
  12,618
  17,524
  23,685
  31,249
  40,346
  51,085
  64,022
  78,273
  94,346
  112,254
  131,992
  153,539
  176,864
  201,931
  228,697
  257,124
  287,174
  318,815
  352,024
  386,786
  423,095
  460,955
  500,384
  541,407
  584,061
  628,395
EBITDA, $m
  1,538
  2,921
  4,515
  6,753
  9,800
  13,827
  19,011
  25,519
  33,509
  43,119
  54,464
  67,632
  82,688
  99,667
  118,585
  139,435
  162,197
  186,838
  213,319
  241,595
  271,625
  303,369
  336,795
  371,877
  408,599
  446,955
  486,951
  528,603
  571,939
  616,999
  663,833
Interest expense (income), $m
  165
  261
  741
  1,439
  2,419
  3,754
  5,518
  7,789
  10,640
  14,140
  18,350
  23,320
  29,088
  35,684
  43,122
  51,409
  60,543
  70,514
  81,308
  92,908
  105,295
  118,450
  132,356
  146,999
  162,367
  178,453
  195,255
  212,776
  231,022
  250,006
  269,745
Earnings before tax, $m
  1,157
  2,033
  3,062
  4,482
  6,386
  8,864
  12,006
  15,896
  20,609
  26,205
  32,735
  40,702
  49,185
  58,663
  69,132
  80,583
  92,996
  106,350
  120,622
  135,789
  151,829
  168,724
  186,460
  205,026
  224,419
  244,642
  265,700
  287,608
  310,385
  334,055
  358,650
Tax expense, $m
  599
  549
  827
  1,210
  1,724
  2,393
  3,242
  4,292
  5,564
  7,075
  8,838
  10,989
  13,280
  15,839
  18,666
  21,757
  25,109
  28,715
  32,568
  36,663
  40,994
  45,556
  50,344
  55,357
  60,593
  66,053
  71,739
  77,654
  83,804
  90,195
  96,835
Net income, $m
  562
  1,484
  2,235
  3,272
  4,662
  6,471
  8,764
  11,604
  15,044
  19,130
  23,896
  29,712
  35,905
  42,824
  50,467
  58,825
  67,887
  77,636
  88,054
  99,126
  110,835
  123,169
  136,115
  149,669
  163,826
  178,588
  193,961
  209,954
  226,581
  243,860
  261,814

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  20,197
  32,308
  49,916
  74,649
  108,312
  152,812
  210,082
  281,991
  370,272
  476,451
  601,796
  747,294
  913,638
  1,101,241
  1,310,260
  1,540,633
  1,792,126
  2,064,379
  2,356,952
  2,669,370
  3,001,165
  3,351,902
  3,721,216
  4,108,827
  4,514,558
  4,938,347
  5,380,252
  5,840,457
  6,319,271
  6,817,129
  7,334,588
Adjusted assets (=assets-cash), $m
  20,197
  32,308
  49,916
  74,649
  108,312
  152,812
  210,082
  281,991
  370,272
  476,451
  601,796
  747,294
  913,638
  1,101,241
  1,310,260
  1,540,633
  1,792,126
  2,064,379
  2,356,952
  2,669,370
  3,001,165
  3,351,902
  3,721,216
  4,108,827
  4,514,558
  4,938,347
  5,380,252
  5,840,457
  6,319,271
  6,817,129
  7,334,588
Revenue / Adjusted assets
  0.000
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
  2.011
Average production assets, $m
  1,508
  2,404
  3,714
  5,554
  8,059
  11,370
  15,632
  20,982
  27,551
  35,451
  44,778
  55,604
  67,981
  81,940
  97,492
  114,634
  133,347
  153,604
  175,374
  198,620
  223,308
  249,405
  276,885
  305,726
  335,915
  367,448
  400,328
  434,571
  470,198
  507,242
  545,745
Working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total debt, $m
  4,655
  13,227
  25,693
  43,204
  67,038
  98,544
  139,091
  190,003
  252,506
  327,680
  416,424
  519,437
  637,209
  770,032
  918,017
  1,081,121
  1,259,178
  1,451,933
  1,659,075
  1,880,267
  2,115,178
  2,363,500
  2,624,974
  2,899,403
  3,186,660
  3,486,702
  3,799,571
  4,125,396
  4,464,397
  4,816,880
  5,183,241
Total liabilities, $m
  14,302
  22,874
  35,340
  52,851
  76,685
  108,191
  148,738
  199,650
  262,153
  337,327
  426,071
  529,084
  646,856
  779,679
  927,664
  1,090,768
  1,268,825
  1,461,580
  1,668,722
  1,889,914
  2,124,825
  2,373,147
  2,634,621
  2,909,050
  3,196,307
  3,496,349
  3,809,218
  4,135,043
  4,474,044
  4,826,527
  5,192,888
Total equity, $m
  5,895
  9,434
  14,575
  21,797
  31,627
  44,621
  61,344
  82,341
  108,120
  139,124
  175,724
  218,210
  266,782
  321,562
  382,596
  449,865
  523,301
  602,799
  688,230
  779,456
  876,340
  978,755
  1,086,595
  1,199,778
  1,318,251
  1,441,997
  1,571,033
  1,705,413
  1,845,227
  1,990,602
  2,141,700
Total liabilities and equity, $m
  20,197
  32,308
  49,915
  74,648
  108,312
  152,812
  210,082
  281,991
  370,273
  476,451
  601,795
  747,294
  913,638
  1,101,241
  1,310,260
  1,540,633
  1,792,126
  2,064,379
  2,356,952
  2,669,370
  3,001,165
  3,351,902
  3,721,216
  4,108,828
  4,514,558
  4,938,346
  5,380,251
  5,840,456
  6,319,271
  6,817,129
  7,334,588
Debt-to-equity ratio
  0.790
  1.400
  1.760
  1.980
  2.120
  2.210
  2.270
  2.310
  2.340
  2.360
  2.370
  2.380
  2.390
  2.390
  2.400
  2.400
  2.410
  2.410
  2.410
  2.410
  2.410
  2.410
  2.420
  2.420
  2.420
  2.420
  2.420
  2.420
  2.420
  2.420
  2.420
Adjusted equity ratio
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292
  0.292

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  562
  1,484
  2,235
  3,272
  4,662
  6,471
  8,764
  11,604
  15,044
  19,130
  23,896
  29,712
  35,905
  42,824
  50,467
  58,825
  67,887
  77,636
  88,054
  99,126
  110,835
  123,169
  136,115
  149,669
  163,826
  178,588
  193,961
  209,954
  226,581
  243,860
  261,814
Depreciation, amort., depletion, $m
  278
  627
  712
  832
  995
  1,210
  1,486
  1,834
  2,260
  2,773
  3,379
  3,611
  4,414
  5,321
  6,331
  7,444
  8,659
  9,974
  11,388
  12,897
  14,500
  16,195
  17,980
  19,852
  21,813
  23,860
  25,995
  28,219
  30,532
  32,938
  35,438
Funds from operations, $m
  2,635
  2,111
  2,947
  4,104
  5,656
  7,680
  10,251
  13,438
  17,305
  21,903
  27,275
  33,323
  40,319
  48,145
  56,797
  66,269
  76,546
  87,610
  99,442
  112,024
  125,336
  139,364
  154,095
  169,521
  185,639
  202,449
  219,956
  238,173
  257,113
  276,798
  297,252
Change in working capital, $m
  784
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from operations, $m
  1,851
  2,111
  2,947
  4,104
  5,656
  7,680
  10,251
  13,438
  17,305
  21,903
  27,275
  33,323
  40,319
  48,145
  56,797
  66,269
  76,546
  87,610
  99,442
  112,024
  125,336
  139,364
  154,095
  169,521
  185,639
  202,449
  219,956
  238,173
  257,113
  276,798
  297,252
Maintenance CAPEX, $m
  0
  -98
  -156
  -241
  -361
  -523
  -738
  -1,015
  -1,362
  -1,789
  -2,302
  -2,908
  -3,611
  -4,414
  -5,321
  -6,331
  -7,444
  -8,659
  -9,974
  -11,388
  -12,897
  -14,500
  -16,195
  -17,980
  -19,852
  -21,813
  -23,860
  -25,995
  -28,219
  -30,532
  -32,938
New CAPEX, $m
  -1,603
  -896
  -1,310
  -1,840
  -2,505
  -3,311
  -4,261
  -5,351
  -6,569
  -7,900
  -9,327
  -10,826
  -12,377
  -13,959
  -15,552
  -17,141
  -18,713
  -20,258
  -21,769
  -23,246
  -24,688
  -26,097
  -27,480
  -28,841
  -30,189
  -31,533
  -32,881
  -34,242
  -35,627
  -37,044
  -38,503
Cash from investing activities, $m
  -2,397
  -994
  -1,466
  -2,081
  -2,866
  -3,834
  -4,999
  -6,366
  -7,931
  -9,689
  -11,629
  -13,734
  -15,988
  -18,373
  -20,873
  -23,472
  -26,157
  -28,917
  -31,743
  -34,634
  -37,585
  -40,597
  -43,675
  -46,821
  -50,041
  -53,346
  -56,741
  -60,237
  -63,846
  -67,576
  -71,441
Free cash flow, $m
  -546
  1,117
  1,481
  2,023
  2,791
  3,846
  5,251
  7,072
  9,373
  12,214
  15,647
  19,589
  24,331
  29,771
  35,924
  42,797
  50,389
  58,693
  67,698
  77,389
  87,751
  98,766
  110,420
  122,701
  135,597
  149,103
  163,215
  177,935
  193,267
  209,222
  225,812
Issuance/(repayment) of debt, $m
  2,870
  8,572
  12,466
  17,511
  23,833
  31,506
  40,547
  50,912
  62,503
  75,174
  88,744
  103,013
  117,772
  132,823
  147,985
  163,104
  178,057
  192,755
  207,142
  221,192
  234,910
  248,322
  261,474
  274,428
  287,257
  300,042
  312,869
  325,825
  339,001
  352,484
  366,361
Issuance/(repurchase) of shares, $m
  -63
  2,055
  2,907
  3,950
  5,168
  6,524
  7,958
  9,393
  10,734
  11,874
  12,705
  12,773
  12,668
  11,956
  10,567
  8,444
  5,549
  1,862
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  2,717
  10,627
  15,373
  21,461
  29,001
  38,030
  48,505
  60,305
  73,237
  87,048
  101,449
  115,786
  130,440
  144,779
  158,552
  171,548
  183,606
  194,617
  207,142
  221,192
  234,910
  248,322
  261,474
  274,428
  287,257
  300,042
  312,869
  325,825
  339,001
  352,484
  366,361
Total cash flow (excl. dividends), $m
  2,170
  11,744
  16,854
  23,484
  31,792
  41,876
  53,756
  67,378
  82,610
  99,262
  117,095
  135,375
  154,771
  174,550
  194,476
  214,345
  233,995
  253,311
  274,840
  298,582
  322,661
  347,088
  371,895
  397,129
  422,855
  449,145
  476,084
  503,760
  532,268
  561,705
  592,173
Retained Cash Flow (-), $m
  -3,738
  -3,539
  -5,141
  -7,222
  -9,830
  -12,994
  -16,723
  -20,998
  -25,778
  -31,004
  -36,601
  -42,485
  -48,573
  -54,780
  -61,033
  -67,269
  -73,436
  -79,498
  -85,431
  -91,226
  -96,884
  -102,415
  -107,840
  -113,182
  -118,473
  -123,746
  -129,036
  -134,380
  -139,814
  -145,375
  -151,098
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  8,205
  11,712
  16,262
  21,962
  28,881
  37,033
  46,380
  56,832
  68,258
  80,495
  92,890
  106,198
  119,770
  133,443
  147,076
  160,559
  173,813
  189,409
  207,356
  225,777
  244,673
  264,055
  283,947
  304,381
  325,399
  347,048
  369,380
  392,454
  416,331
  441,075
Discount rate, %
 
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
 
  7,647
  10,104
  12,892
  15,876
  18,880
  21,701
  24,132
  25,994
  27,152
  27,533
  26,991
  25,880
  24,146
  21,936
  19,414
  16,743
  14,075
  11,695
  9,576
  7,642
  5,941
  4,496
  3,311
  2,370
  1,648
  1,112
  727
  460
  282
  167
Current shareholders' claim on cash, %
  100
  87.3
  77.4
  69.5
  63.3
  58.2
  54.2
  51.0
  48.3
  46.2
  44.5
  43.2
  42.2
  41.4
  40.8
  40.5
  40.3
  40.2
  40.2
  40.2
  40.2
  40.2
  40.2
  40.2
  40.2
  40.2
  40.2
  40.2
  40.2
  40.2
  40.2

Centene Corporation operates as a diversified and multi-national healthcare enterprise that provides programs and services to under-insured and uninsured individuals in the United States. It operates through two segments, Managed Care and Specialty Services. The Managed Care segment offers Medicaid and Medicaid-related health plan coverage to individuals through government subsidized programs, including Medicaid, the State childrenÂ’s health insurance program, long-term care, foster care, and dual-eligible individual, as well as aged, blind, or disabled programs. Its health plans include primary and specialty physician care, inpatient and outpatient hospital care, emergency and urgent care, prenatal care, laboratory and X-ray services, home health and durable medical equipment, behavioral health and substance abuse, 24-hour nurse advice line, transportation assistance, vision care, dental care, immunizations, prescriptions and limited over-the-counter drugs, specialty pharmacy, therapies, social work services, and care coordination. The Specialty Services segment provides pharmacy benefits management services; health, triage, wellness, and disease management services; vision services; dental services; correctional healthcare services; in-home health services; and integrated long-term care services, as well as care management software that automate the clinical, administrative, and technical components of care management programs. This segment offers its services and products to state programs, healthcare organizations, employer groups, and other commercial organizations. The company provides its services through primary and specialty care physicians, hospitals, and ancillary providers. Centene Corporation was founded in 1984 and is headquartered in St. Louis, Missouri.

FINANCIAL RATIOS  of  Centene (CNC)

Valuation Ratios
P/E Ratio 25.4
Price to Sales 0.4
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 7.7
Price to Free Cash Flow 57.4
Growth Rates
Sales Growth Rate 78.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 854.2%
Cap. Spend. - 3 Yr. Gr. Rate 65%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 78.9%
Total Debt to Equity 79%
Interest Coverage 8
Management Effectiveness
Return On Assets 4.7%
Ret/ On Assets - 3 Yr. Avg. 5.6%
Return On Total Capital 8.1%
Ret/ On T. Cap. - 3 Yr. Avg. 10.6%
Return On Equity 14%
Return On Equity - 3 Yr. Avg. 16.8%
Asset Turnover 2.9
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 3.9%
EBITDA Margin - 3 Yr. Avg. 3.8%
Operating Margin 3.1%
Oper. Margin - 3 Yr. Avg. 3%
Pre-Tax Margin 2.8%
Pre-Tax Margin - 3 Yr. Avg. 2.9%
Net Profit Margin 1.4%
Net Profit Margin - 3 Yr. Avg. 1.5%
Effective Tax Rate 51.8%
Eff/ Tax Rate - 3 Yr. Avg. 47.8%
Payout Ratio 0%

CNC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNC stock intrinsic value calculation we used $40607 million for the last fiscal year's total revenue generated by Centene. The default revenue input number comes from 2016 income statement of Centene. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CNC stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.3%, whose default value for CNC is calculated based on our internal credit rating of Centene, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Centene.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CNC stock the variable cost ratio is equal to 96.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3 million in the base year in the intrinsic value calculation for CNC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.6% for Centene.

Corporate tax rate of 27% is the nominal tax rate for Centene. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CNC stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CNC are equal to 3.7%.

Life of production assets of 15.4 years is the average useful life of capital assets used in Centene operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CNC is equal to 0%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $5895 million for Centene - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 170.533 million for Centene is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Centene at the current share price and the inputted number of shares is $14.1 billion.

RELATED COMPANIES Price Int.Val. Rating
MOH Molina Healthc 56.78 356.65  str.buy
WCG WellCare Healt 174.64 1,154.00  str.buy
AET Aetna 155.90 111.06  sell
UNH UnitedHealth G 193.77 203.69  hold
MGLN Magellan Healt 78.65 982.04  str.buy
GTS Triple-S Manag 23.64 18.21  hold
ANTM Anthem 193.35 302.45  str.buy
HUM Humana 247.36 152.36  sell

COMPANY NEWS

▶ Molina Healthcare: Double The Upgrade, Double The Fun   [Aug-17-17 11:16AM  Barrons.com]
▶ UnitedHealth CEO to step down after run of more than decade   [Aug-16-17 03:37PM  Associated Press]
▶ [$$] Nevada Counties Gain ACA Exchange Plans   [Aug-15-17 05:53PM  The Wall Street Journal]
▶ Obamacare just got some much-needed good news   [02:20PM  Business Insider]
▶ ETFs with exposure to Centene Corp. : August 8, 2017   [Aug-08-17 04:14PM  Capital Cube]
▶ Aetna Trounces Expectations As Big ObamaCare Insurer Crashes   [Aug-03-17 04:02PM  Investor's Business Daily]
▶ Trumps latest threat would hurt his own supporters   [01:23PM  Yahoo Finance Video]
▶ Centene beats Street 2Q forecasts   [Jul-25-17 09:16PM  Associated Press]
▶ One Insurer Is Making Obamacare Work   [09:21AM  Bloomberg]
▶ Centene beats Street 2Q forecasts   [06:11AM  Associated Press]
▶ S&P Stealth Outperformers: Health Care   [Jul-20-17 12:00PM  Investopedia]
▶ Insurer steps into void from Blue KC's departure from marketplace   [Jul-17-17 05:20PM  American City Business Journals]
▶ Centene CEO Says Health Bill Moving in Right Direction   [Jul-12-17 03:42PM  Bloomberg Video]
▶ Insurers Move Into 'Bare' Obamacare Counties   [Jul-03-17 08:23AM  Forbes]
▶ [$$] Centene to Offer ACA Exchange Plans in 40 Missouri Counties in 2018   [Jun-30-17 07:31PM  The Wall Street Journal]
▶ Centene to offer coverage in 25 western Missouri counties   [03:35PM  American City Business Journals]
▶ Centene CEO Says GOP Health Bill Has Come a Long Way   [Jun-23-17 03:08PM  Bloomberg Video]
▶ Michael Neidorff sells $1.9 million worth of Centene stock   [Jun-15-17 12:25PM  American City Business Journals]
▶ Centene Runs Against Current on Obamacare   [Jun-14-17 03:45PM  TheStreet.com]
▶ Key insurer Centene plans to expand health exchange presence   [Jun-13-17 04:15PM  Associated Press]
▶ IBD's No. 1-Ranked Insurer Just Gave ObamaCare A Big Hug   [04:14PM  Investor's Business Daily]
▶ [$$] Centene to Expand Affordable Care Act Marketplaces   [01:22PM  The Wall Street Journal]
▶ Obamacare just got some much-needed good news   [09:34AM  Business Insider]
▶ Centene Corp. Value Analysis (NYSE:CNC) : June 2, 2017   [Jun-02-17 02:51PM  Capital Cube]
Stock chart of CNC Financial statements of CNC
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.