Centene Corporation (CNC): Among the Cheap Healthcare Stocks to Buy Heading Into 2025

Healthcare stocks have had a challenging year, but analysts and investors are optimistic about 2025, and the sector has begun to show signs of recovery in recent months. For investors looking to capitalize on the potential rebound in the healthcare sector, the challenge is to find stocks that have underperformed but still have room to grow. In this article, we will focus on Centene Corporation (CNC), a healthcare enterprise that provides programs and services to under-insured and uninsured families, commercial organizations, and military families in the United States. We will analyze Centene's financial performance, valuation, and growth prospects to determine if it is a cheap healthcare stock to buy heading into 2025.



Centene Corporation's Financial Performance

Centene Corporation operates through multiple segments, including Medicaid, Medicare, Commercial, and Other. This diversification helps the company mitigate risks associated with relying on a single revenue stream and contributes to its earnings growth. In the last 12 months, Centene had revenue of $146.20 billion and earned $3.07 billion in profits. Earnings per share (EPS) was $5.75.

Centene's revenue growth rate for the 12 months ending on 2024-09-30 is 0.061, which is relatively low compared to its peers in the healthcare industry. However, the company's operating margin is 3.20%, and its profit margin is 2.10%. These figures are lower than the industry average, but Centene's return on equity (ROE) of 11.56% and return on assets (ROA) of 3.51% indicate that the company is generating returns for its shareholders and efficiently utilizing its assets.



Centene Corporation's Valuation

Centene Corporation has a market capitalization of $30.59 billion and an enterprise value of $33.62 billion as of December 29, 2024. The company's trailing P/E ratio is 10.54, and its forward P/E ratio is 8.90. Centene's PEG ratio is 0.83, indicating that the company's earnings growth is expected to be higher than its P/E ratio would suggest.

Centene's valuation metrics suggest that the stock is relatively cheap compared to its peers in the healthcare industry. The company's price-to-book (P/B) ratio of 1.13 is lower than the industry average, and its price-to-sales (P/S) ratio of 0.2093 is also lower than the industry average. These metrics indicate that Centene's stock may be undervalued relative to its fundamentals.

Centene Corporation's Growth Prospects

Analysts have a consensus rating of "Buy" for Centene Corporation, with an average price target of $80.73, which is 33.22% higher than the current price. The average revenue growth forecast for the next five years is not available, but the average EPS growth forecast for the same period is 14.16%.

Centene's diversified business model, strong fundamentals, and cheap valuation make it an attractive investment opportunity heading into 2025. The company's focus on government-sponsored healthcare programs provides a stable revenue stream, and its expansion into new markets and commercial health plans offers growth potential. Additionally, Centene's strong balance sheet, with a current ratio of 1.10 and a debt-to-equity ratio of 0.64, supports the company's long-term sustainability.



In conclusion, Centene Corporation (CNC) is a cheap healthcare stock to buy heading into 2025. The company's diversified business model, strong fundamentals, and attractive valuation make it an appealing investment opportunity. While the company's revenue growth has been relatively low in recent years, its earnings growth prospects and analyst ratings suggest that Centene has significant room to grow in the coming years. Investors looking to capitalize on the potential rebound in the healthcare sector should consider adding Centene Corporation to their portfolios.