Centene Corp (CNC)

Conclusion

Centene Corporation is a United States managed care company that runs health plans for Medicaid, Medicare and commercial customers. At 68.54 USD on 9 November 2026, its market capitalisation is 33.9 billion USD.

The verdict is undervalued. The fair value band runs from 97.70 to 146.55 USD with a midpoint of 122.13 USD, giving a margin of safety of 78.2% at the current price. Against their own ten-year medians, EV/EBITDA stands at 6.8 versus 10.4, price to sales at 0.17 versus 0.30 and price to book at 1.53 versus 1.77, while the P/E of 23.2 sits above its median of 21.2. The discounted cash flow gives 164.83 USD per share at a discount rate of 10.29%, and the fair value from historical multiples is 79.42 USD. The reverse DCF implies revenue growth of -2.7% a year, against a five-year revenue CAGR of 11.9% and a five-year free cash flow per share CAGR of 1.9%.

The strongest numbers are the ROIC of 14.3% against a WACC of 8.3%, net debt to EBITDA of -2.13 (net cash), and a Piotroski score of 7 out of 9. The weakest are the operating margin of 0.6% against a ten-year median of 2.2%, the three-year free cash flow per share CAGR of -0.9%, and interest coverage of 4.0, which is on watch. A further fall in operating margin would undermine the earnings base on which the valuation rests.

Financial health

Financial strength is green, held up by a safe Altman Z-score of 3.21 and net cash of 2.13 times EBITDA, and held back only slightly by on-watch and neutral liquidity and coverage. The current ratio is 1.16 and the quick ratio 1.12, while interest coverage is 4.0 and debt to equity is 0.70. The Altman model was designed for manufacturers, and Centene is not one, so its zone should be read with caution. Insolvency risk: low, about 1.9% by the estimate of the Ohlson model over one to two years. The company's low leverage and positive coverage keep this risk assessment low, though liquidity leaves limited cushion.

Earnings quality

Earnings quality is green. Free cash flow conversion is 2.7 times on a trailing twelve-month basis and 10.4 times over five years. The accrual ratio of -14.7% means cash generation exceeds reported earnings. Stock-based compensation is 0.12% of revenue, and free cash flow after it is 3.72 billion USD. The share count fell at a CAGR of 3.25% over five years, which reflects buybacks. The Piotroski score is 7 of 9 and the Beneish M-score of -3.24 is in the unlikely range. Centene beat estimates in 7 of the last 8 quarters, with an average surprise of 160.7%. Current-year estimates rose 8.1% over 90 days with 13 upward and no downward revisions in 30 days, while next-year estimates rose 5.7% with 10 upward and 4 downward.

Profitability

Profitability is yellow. Every margin sits below its ten-year median: gross margin 16.4% against 12.1%, operating margin 0.6% against 2.2%, and net margin 0.8% against 1.6%. The return on invested capital of 14.3% exceeds the WACC of 8.3%, and the reported ROIC minus WACC of 6.0% creates value. The five-year median ROIC was 6.7%, so current returns are above their history. Return on equity is 6.6%. The 2025 DuPont split shows a net margin of -3.4%, an asset turnover of 2.51 and an equity multiplier of 3.89, so leverage and asset turnover, not margin, carried the return. ROIC is the more reliable guide here.

Growth

Growth is green. Revenue has compounded at 10.5% over three years, 11.9% over five and 24.0% over ten, and it grew in all 10 comparable years. Free cash flow per share has been weaker, with a three-year CAGR of -0.9%, a five-year CAGR of 1.9% and a ten-year CAGR of 15.6%. An EPS CAGR is not available. The consensus estimate for next year's EPS growth is 4.95%, well below the revenue growth delivered over the past five years.

Valuation

Valuation is green, reflecting a verdict of undervalued and a margin of safety of 78.2%. Against their ten-year medians, EV/EBITDA is at a discount of 34.3%, price to sales at 41.4% and price to book at 13.7%. The P/E shows a premium of 9.4% and the P/FCF a premium of 7.1%. The DCF gives 164.83 USD per share at a discount rate of 10.29%, with the terminal value making up 53.4% of that figure. The fair value is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, not a price target. The tax rate was assumed at 21%. The reverse DCF implies -2.7% growth, which is -14.6% against the five-year revenue CAGR and -4.6% against the five-year free cash flow per share CAGR. The company pays no dividend, so the forward yield is 0.

Risks

The operating margin of 0.6% is the main weakness: a margin near this level leaves little room for cost pressure to be absorbed without denting earnings. The three-year free cash flow per share CAGR of -0.9% means recent per-share cash growth has stalled, and the reverse DCF relies on that trend not continuing. Interest coverage of 4.0 and a current ratio of 1.16 leave a thinner buffer if earnings fall. The DCF rests on a 53.4% terminal value share, so its output is sensitive to the discount rate and long-term growth. Not available: an EPS CAGR and a debt maturity schedule. This analysis also lacks revenue by segment, so it cannot show which of the four segments drives the margin pressure.