When those occupying the upper echelons of a company are busy buying back their own stock, it’s often a good indicator that things are on the up. It radiates confidence in the corporation’s potential to generate substantial income and revenue growth, as well as an unyielding optimism in its eventual expansion.
Moreover, it’s a public demonstration of the management’s unwavering commitment to their organization and exhibits a willingness to align with shareholder interests and cooperate in overall accountability.
In fact, by putting their money where their mouth is, executives send a clear message that they have skin in the game – a gesture that tends to reassure investors and employees alike, particularly during challenging times when doubts about stability may loom large on everyone’s mind.
Indeed, one company that’s seen a flurry of insider trading is The Cigna Group (NYSE:CI), with directors such as Mark B. McClellan and Donna F. Zarcone acquiring stock in the last couple of months.
Therefore, let’s take a closer look at this healthcare behemoth – and see why the firm’s hierarchy is so eager to buy up its shares right now.
Cigna: The 10,000 Foot View
The Cigna Group is a globally operating health service corporation with a wide-ranging collection of healthcare products and services. The establishment offers comprehensive health plans encompassing medical, dental, disability, life, and accident insurance and is also a prominent Medicare and Medicaid coverage provider to eligible Americans.
With a steadfast mission to enhance the health and vitality of its clientele, CI is devoted to collaborating and inventing solutions for improved health. It continually challenges itself to advance its brand and workforce in constructing the finest healthcare encounter for its consumers.
And yet, despite expectations that its core segments would slow down as they mature, the revenue generated from foundational operations – such as Pharmacy Benefit Services and International Health – still accounts for a massive 60% of sales.
Boasting a workforce of over 70,000 employees worldwide – and a client base of over 180 million customers – Cigna persistently contributes to the healthcare industry by delivering top-quality healthcare services and insurance policies to individuals and companies across the globe.
Cigna Quarterly Results Impress
At a time when some firms have been floundering due to the high-inflationary environment of the last year or so, Cigna has shown remarkable resiliency to these unfavorable conditions.
For instance, the company saw its total revenues grow 6% year-on-year to $46.5 billion in the first quarter of fiscal 2023, while net income was also up 6% at $4.24 per share.
However, because of the impact of some of its divested businesses, CI’s adjusted income from operations fell 16% from $1.9 billion to $1.6 billion.
On a brighter note, Cigna’s total pharmacy customer base grew 5% sequentially to 98.7 million, with total medical customers increasing by an impressive 8% from December 31, 2022.
That said, the enterprise did witness a decline in its total customer relationships due to a non-renewal coverage contract with New York Life – although this had little meaningful pecuniary impact on its balance sheet. In fact, absent this non-renewal, CI would have gained 9% and 5% in its behavioral care and total customer relationships, respectively.
A Traditional Business With Emerging Possibilities
In adopting a “digital-first” approach, Cigna has recently taken the lead in healthcare innovation. This strategy incorporates cutting-edge technologies to deliver exceptional patient care while optimizing healthcare providers’ efficiency.
At the core of this process is virtual care, which facilitates remote access to medical services via videoconferencing technology, making healthcare more accessible and convenient for patients worldwide.
Additionally, CI has made significant investments in advanced patient-monitoring applications, enabling doctors to remotely track vital signs and proactively identify potential health complications before they become serious concerns, a critical capability for those managing chronic conditions.
Moreover, Cigna has a huge opportunity in the growing specialty pharmacy business too. Indeed, having acquired Accredo as part of its takeover of Express Scripts in 2018, the firm now believes it has access to an additional $315 billion market in the pharmacy and medical benefit space over the next five years.
Crucially, this is an opening where just 2% of customers account for more than 50% of total spending, presenting Cigna with a real chance of widening its profitability and operating margins.
Is Cigna A Good Long Term Investment?
The US-managed healthcare industry is a swiftly growing sector that’s become more sophisticated with the emergence of novel technologies and treatments.
These technological advancements allow doctors to provide personalized treatment plans based on each patient’s individual needs and history – providing them better chances at full recovery while ensuring they avoid any adverse side effects often seen through trial-and-error methods used before these innovative approaches came along.
Cigna’s business is in a perfect position to capitalize on these secular tailwinds, and its underlying financial metrics bear this out.
For example, CI’s forward GAAP PE multiple of 13.3 is incredibly enticing, considering that the sector median is as high as 28.1.
Furthermore, Cigna’s closest rival in terms of market capitalization, CVS Health Corporation, has a return on common equity of just 5.4%. This compares poorly to CI’s, which currently stands at 14.9%.
Interestingly, it’s not just the firm’s employees who are buying Cigna’s stock, as the company has itself repurchased 3.7 million shares so far this year.
This should undergird Cigna’s earnings growth, giving you one more reason to invest in this excellent business.
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