CENTENE CORPORATION (CNC): what the price requires

The current priced-in claim for CENTENE CORPORATION (CNC) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-14 · Exported: 2026-07-17 · Source: https://boothcheck.com/report/CNC

Headline

FieldValue
TickerCNC
CompanyCENTENE CORPORATION
Current price$68.46/sh
CompositionMedicaid 58% / Medicare 20% / Commercial 22%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfinancials
Price-to-book1.58x

The implied return on book is non-physical at this price-to-book and is suppressed as misleading. The rarity read below is the honest signal.

How unusual the bet is: within-range

ReferenceValue
vs own history+0.14σ
cohort percentile (of 80 peers)41
sustained it ~10 years at this level73%
implied end-window share0%

Valuation X-Ray

The price is supported by earnings-power and relative-multiple and growth-DCF value, while asset-based lands below the price. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.58x3expensive
Earnings0.43x3justifies
Relative0.24x2justifies
Growth0.52x2justifies

Families that justify the price: Earnings, Relative, Growth Families that call it expensive: Asset

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.5%); the inversion above states its own rate.

Per-Model Detail (n=10)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$279.810.24xyesP/S fallback (negative EPS): Sector P/S 0.7x × TTM revenue — excluded from consensus
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$43.241.58xyesBook value floor: BV/sh $43.24, ROE negative
Two-Stage Excess ReturnAsset$38.911.76xyesBook value with convergence: BV/sh $43.24, ROE converges to ke
Discounted Future Market CapGrowth$69.760.98xyesRev $198.1B, growth 17% (input: historical growth; tapered), Terminal P/S: 0.1x / 0.2x / 0.2x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$0.00—noNegative/zero EPS — earnings-based value floored at $0
Margin TrajectoryGrowth$1076.930.06xyesMargin ramp: -3% → 12% over 7yr, rev growth 17% (input: historical growth; tapered)
Earnings Power ValueEarnings$66.251.03xyesNormalized EBIT (5y avg op income, one-time charges added back) $2.56B × (1−27%) / WACC 6.5% → EPV (no growth)
Residual IncomeAsset——no—
Graham NumberAsset——no—
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings$165.010.41xyesFCF $7112.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$160.390.43xyesSBC-adj FCF $6.90B (FCF $7.11B − SBC $0.21B) capitalized at Kₑ
Ben Graham FormulaEarnings——no—
ROIC-Justified P/BAsset$55.081.24xyesBV $43.24 × (ROIC 8.3% / WACC 6.5%)
P/Sales SectorRelative$279.810.24xyesRevenue $198.10B × sector P/S 0.7x
PEG Fair ValueRelative——no—
Earnings YieldEarnings——no—
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Share count CAGR (buyback)-4.3%

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

Bull Case

The earnings trajectory is the bull case, and it has just inflected. Centene came through a punishing 2025, when Medicaid medical costs ran ahead of the rates states were paying and the company swung to a loss, and the first quarter of 2026 showed the recovery taking hold: net earnings of $1.5 billion as the consolidated health benefits ratio improved to 87.3% and, more importantly, the Medicaid loss ratio fell 50 basis points to 93.1% on rate and revenue increases. For a managed-care insurer, the loss ratio is the whole game, the share of premiums paid out as medical claims, and a falling Medicaid ratio is direct evidence that the rates Centene fought for are finally catching up to its costs. Management raised full-year guidance, lifting its premium and service revenue range to $171 to $175 billion, a signal it sees the improvement continuing.

The scale underneath the recovery is enormous and hard to replicate. Centene runs roughly $198 billion of revenue and is the dominant Medicaid contractor in a business where scale, state relationships, and the operational machinery to manage millions of low-income members are the moat. Medicaid is a contract business won state by state, and incumbency matters; the same loss-ratio discipline its peers describe applies, with Elevance noting that benefit expense "primarily includes costs of care" measured against the premiums states pay. Centene's size lets it spread fixed costs across the largest membership base in the category. The company also generates substantial free cash flow, more than $7 billion on a trailing basis, which it has used to retire about $1 billion of debt and to buy back stock, shrinking its share count more than 4% a year.

The valuation is where the recovery meets a cheap price. The stock trades at roughly 1.4 times book value, in the lower half of the managed-care peer group, even as the earnings power rebuilds. The earnings-power, relative-multiple, and growth-dependent methods all land above the price; on free cash flow alone, capitalized conservatively, the business prices well above where it trades. The buyback is retiring shares while the price is depressed, which compounds the per-share recovery. The bull case is a dominant, cash-rich Medicaid insurer that hit an earnings trough, is climbing out of it as rates reprice, and trades at a discount to both its peers and its own normalized earnings power.

Bear Case

The narrative the price now depends on is that Medicaid rates stay adequate and the marketplace stabilizes, and both are fragile assumptions outside Centene's control. Medicaid is a government program, and the rates states pay are set in annual cycles that lag the actual cost of care; the 2025 loss was precisely a case of costs outrunning rates, and there is no guarantee the catch-up holds through the mid-year rate cycles. The first quarter's improved Medicaid loss ratio is encouraging, but a single quarter near a seasonal low is not proof of a sustainable base, and if utilization rises or states tighten budgets, the same margin compression that caused the 2025 loss can return. The whole sector is feeling cost pressure; UnitedHealth's own filing notes businesses "impacted by Medicare funding reductions" and "continued medical cost trend pressures", the same forces bearing on Centene.

The marketplace collapse is the more visible problem. ACA marketplace membership fell to 3.6 million from 5.6 million a year earlier, a loss of roughly a third of the book in twelve months. Some of that is deliberate repricing of unprofitable membership, but a third of an enrollment base disappearing is a real revenue and scale headwind, and the remaining members skew toward higher acuity, which pressures the commercial loss ratio. The marketplace was a growth engine that has become a source of uncertainty, and the bull's margin-recovery story has to overcome a shrinking top line in one of its three segments.

Because Centene is an insurer, the price has to be read off the return it earns on its capital, and there the bear has a clean point: the stock trades at about 1.4 times book value, but the return that multiple implies is one no sustainable record cleanly supports given the company's recent loss-making stretch. The price pays a premium to book that assumes the recovery not only holds but normalizes to a healthy return, and the company's own history includes a year where the return went sharply negative. The usual solvency lenses do not apply to an insurer; what matters is reserve and rate adequacy, and the bear's case is that Medicaid rate risk and marketplace shrinkage make the earned return less certain than a 1.4-times-book price assumes. Analysts reflect exactly this split, with targets ranging from the low $30s to $70 on a binary read of Medicaid rate adequacy.

Valuation

Centene must be valued the way any insurer is, off the return it earns on its capital read through price-to-book, and that lens carries an important caveat here. The stock trades at roughly 1.4 times book value, in the lower half of the managed-care peer group, but the company is climbing out of a loss-making stretch, so the return that this multiple implies is one no sustainable record cleanly supports. The price pays a premium to book that assumes the recovery normalizes into a healthy, durable return rather than a one-quarter rebound. That assumption, not a number, is the bet.

The method families mostly read the stock as cheap, which is the tension with the book-multiple caution. The earnings-power methods, capitalizing normalized operating profit, land above the price. The free-cash-flow methods, working off more than $7 billion of trailing free cash flow, land far above it. The relative methods, on a sales multiple appropriate to a high-revenue, thin-margin insurer, also land above. Only the book-value methods sit near or modestly below the price, because the recent loss depressed the return on equity that the asset-based lenses read. The pattern is a value or asset-supported situation distorted by a trough year: on normalized earnings and cash flow the stock looks inexpensive, while on the depressed trailing book return it looks fully priced. The reconciliation is that the price is paying for a recovery the cash flow already supports but the trailing book return does not yet reflect.

For an insurer the solvency frame is regulatory capital and rate adequacy, not the corporate leverage lenses, and Centene's capital position looks sound, with strong free cash flow funding both debt reduction of about $1 billion and continued buybacks. The capital-return capacity, measured against earnings, is real, and the shrinking share count compounds any per-share recovery. The decisive variable is whether the Medicaid loss ratio stays at or below its recent improved level through the rate cycles, and whether the marketplace stabilizes after its enrollment drop. If the recovery holds, the cash-flow and earnings methods say the discount is the opportunity; if Medicaid rates lag costs again, the premium-to-book price is the risk, and the wide analyst target range is the market pricing that fork honestly.

Catalysts

The turnaround is the catalyst, and the first quarter delivered the first clear evidence of it. Centene posted $1.5 billion in net earnings with the consolidated health benefits ratio improving to 87.3%, the Medicaid loss ratio falling 50 basis points to 93.1%, and the Medicare loss ratio improving to 84.9%. Management raised full-year 2026 guidance, lifting premium and service revenue to a range of $171 to $175 billion. The next several quarters test whether the Medicaid loss ratio holds through the mid-year state rate cycles, which is the single most important confirmation the recovery needs.

The marketplace is the catalyst working the other way. ACA enrollment fell to 3.6 million from 5.6 million a year earlier, a steep decline as the company repriced unprofitable membership, and the remaining book carries higher acuity. Management is guiding marketplace margins to recover toward positive territory, so the watch item is whether the smaller, repriced book actually turns profitable or whether the membership loss outruns the margin repair.

Capital allocation is the steadier catalyst. Centene generated more than $7 billion of trailing free cash flow, retired about $1 billion of debt, and continued buying back stock, shrinking its share count more than 4% a year. Analyst sentiment is cautious and split, mostly Holds with a mean target around $43 and a spread from the low $30s to $70, reflecting a binary read on Medicaid rate adequacy. The events that resolve the split are the quarterly Medicaid loss-ratio prints and any state rate actions, which are what move the earned return the valuation depends on.

Peer Cohorts (Per Segment, With Filing Citations)

Medicaid (reported)

Medicare (reported)

Commercial (reported)

Other (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 2026 results · company FY2026 guidance · company disclosures, 2026 · analyst notes, 2026

View the full interactive CNC report on boothcheck