Centene’s (NYSE:CNC) Five-Year Total Shareholder Returns Outpace the Underlying Earnings Growth
Investing with a long-term perspective is primarily about generating profits. Ideally, investors aspire to see their stock’s price ascend more swiftly than the market. Despite the Centene Corporation’s (NYSE:CNC) share price increasing by 38% over the last five years—a growth underwhelming when compared to the broader market’s performance—there is more to this figure than meets the eye. Particularly in the past year, Centene’s stock has seen a commendable rise of 10%.
This recent dip of 7.3% in the stock’s price over the past week prompts a deeper examination into the company’s performance over a more extended period, aiming to discern if fundamental factors have played a significant role in the positive five-year return that shareholders have witnessed.
Invoking the wisdom of Warren Buffett, “Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…” This sentiment underscores the occasional misalignment between a company’s market valuation and its actual worth. A rudimentary yet insightful method to gauge how the market’s perception of a company has evolved is by juxtaposing the change in earnings per share (EPS) with the fluctuation in share price.
Over the span of five years, Centene has impressively increased its EPS by 17% annually. This EPS growth rate surpasses the annual share price increase of 7% observed during the same timeframe. This discrepancy suggests a growing caution among the broader market towards Centene’s stock.
While Centene’s bottom line has shown improvement, it’s essential to ponder whether this uptrend in earnings can sustain itself without corresponding revenue growth. Investors seeking further illumination on this aspect might find value in a free report on analyst revenue forecasts for Centene, providing deeper insights into the company’s potential for sustained EPS growth.
For the current year, Centene’s shareholders have seen a 10% return on their investment. Although this performance lags behind the general market, it notably outpaces the average annual return of 7% over the past five years. This trend hints at a potential ongoing improvement in the company’s market positioning. For those looking to make informed investment decisions, examining insider transactions could offer additional context. Such analysis might reveal whether the company’s insiders have been buying or selling shares recently.
It’s worth mentioning that Centene might not be the singular best investment opportunity available. Thus, investors constantly on the lookout for high-growth potential stocks might appreciate a free collection of growth stocks curated to suit diverse investment profiles.
In conclusion, while the quick glance at Centene’s stock might not reveal the full picture, a comprehensive analysis of its five-year performance suggests a company that, despite market fluctuations and short-term setbacks, exhibits a promising trajectory of earnings growth. Whether this growth is sustainable in the long term remains a focal point for current and prospective investors.
Please note, the market returns referenced in this discussion are indicative of the market weighted average returns of stocks actively traded on American exchanges.
