Cigna Corp (CI)

Conclusion

The Cigna Group is a US health services company whose two segments, Evernorth Health Services and Cigna Healthcare, provide pharmacy benefit management and medical plans for employers and individuals. The share trades at 295.60 USD, giving a market capitalisation of 77.89 billion USD.

The verdict is undervalued. The price-to-earnings ratio of 13.0 sits below its ten-year median of 15.3, and enterprise value to EBITDA of 8.1 sits below its median of 9.4. The discounted cash flow gives 831.09 USD per share at a discount rate of 8.87%. The fair value band runs from 471.41 to 707.11 USD with a midpoint of 589.26 USD, a margin of safety of 99.3% at the current price. The reverse DCF implies growth of -4.7% a year, against revenue growth of 11.4% over five years and free cash flow per share growth of 4.7% over the same period.

What holds the case up: free cash flow conversion of 1.38 on a trailing basis, a Piotroski score of 7 out of 9, and a return on invested capital of 11.5% against a WACC of 7.46%. What could break it: a current ratio of 0.84, interest coverage of 6.98, and an operating margin of 3.35%, below its ten-year median of 4.88%. Five-year EPS growth is negative at -0.49% a year.

Financial health

Financial strength is yellow: net debt to EBITDA of 1.90 is assessed good, while the current ratio of 0.84 and interest coverage of 6.98 are assessed neutral and flagged as watch. The quick ratio is 0.69 and debt to equity is 0.72. The Altman Z-score is 2.82, in the grey zone; the Altman model was designed for manufacturers, and the company is not one, so the score is indicative only. Insolvency risk: low, about 0.8% by the estimate of the Ohlson model over one to two years, based on figures as of 2025-12-31.

Earnings quality

Earnings quality is green, with all four assessed signals good. Free cash flow conversion is 1.38 on a trailing basis and 1.54 over five years, and free cash flow after stock-based compensation is 8.27 billion USD. The accrual ratio is -0.0232, meaning cash generation runs ahead of reported earnings. The share count fell at a compound rate of 6.3% over five years, consistent with buybacks. The Piotroski score is 7 out of 9, and the Beneish M-score of -2.29 is read as unlikely to indicate manipulation. The company beat estimates in 7 of the last 8 quarters, with an average surprise of 1.09%. Next year's EPS estimate stands at 9.16% growth, with a 90-day change of -0.24%. The stock-based compensation to revenue ratio is not available.

Profitability

Profitability is yellow. Return on invested capital is 11.51% against a WACC of 7.46%, a ROIC minus WACC of 4.06%, which the model reads as value creation; its five-year median is 10.61%. Margins sit below their ten-year medians: gross margin 10.26% against 14.14%, operating margin 3.35% against 4.88%, and net margin 2.09% against 3.52%. Operating margin stability is 0.35. Return on equity is 13.81%, but the DuPont split shows a net margin of 2.17%, asset turnover of 1.74 and an equity multiplier of 3.79. Leverage contributes materially to that return, so return on invested capital is the better guide to quality.

Growth

Growth is yellow, with three of four signals good and EPS growth assessed bad. Revenue compounds at 15.1% over three years, 11.4% over five and 21.9% over ten, and revenue grew in all 10 comparable years. EPS compounds at 1.5% over three years, -0.5% over five and 10.8% over ten. Free cash flow per share compounds at 10.3% over three years, 4.7% over five and 14.1% over ten. Top-line growth has been strong; per-share earnings growth has lagged it over the past five years.

Valuation

Valuation is green. Against ten-year medians, the price-to-earnings ratio of 13.0 carries a premium of -14.9% (median 15.3), enterprise value to EBITDA of 8.1 a premium of -14.0% (median 9.4), price to free cash flow of 9.4 -4.0% (median 9.8), price to sales of 0.27 -45.1% (median 0.50), and price to book of 1.80 -7.9% (median 1.95). The DCF gives 831.09 USD per share at a discount rate of 8.87%, using 11.4% initial growth and 2.5% terminal growth. The fair value from historical multiples is 347.42 USD. The fair value band runs from 471.41 to 707.11 USD with a midpoint of 589.26 USD. The band is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, not a price target. The dividend yield is 2.1%, the forward yield 2.13%, and the payout is 19.74% of free cash flow.

Risks

A current ratio below 1 means short-term obligations exceed liquid assets, which leaves little room for a funding shock. Interest coverage of 6.98 is adequate but would narrow if earnings fell. A 3.35% operating margin leaves little buffer against cost pressure, and five-year EPS shrinkage shows that revenue growth has not reached shareholders. The Altman Z-score in the grey zone adds no reassurance. The DCF of 831.09 USD sits far above the fair value from historical multiples of 347.42 USD, so the valuation depends heavily on the assumptions chosen. Stock-based compensation to revenue is not available. This analysis does not cover a debt maturity schedule or revenue by segment, so refinancing timing and the mix between Evernorth and Cigna Healthcare cannot be assessed.