Should Value Investors Buy Centene (CNC) Stock?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Centene (CNC) is a stock many investors are watching right now. CNC is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 7.42. This compares to its industry's average Forward P/E of 11.96. Over the past year, CNC's Forward P/E has been as high as 11.12 and as low as 7.36, with a median of 8.64.

CNC is also sporting a PEG ratio of 0.65. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CNC's PEG compares to its industry's average PEG of 1.11. Over the last 12 months, CNC's PEG has been as high as 1.02 and as low as 0.64, with a median of 0.80.

Another valuation metric that we should highlight is CNC's P/B ratio of 0.98. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 2.21. CNC's P/B has been as high as 1.54 and as low as 0.97, with a median of 1.14, over the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. CNC has a P/S ratio of 0.16. This compares to its industry's average P/S of 0.33.

Finally, we should also recognize that CNC has a P/CF ratio of 5.87. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. CNC's P/CF compares to its industry's average P/CF of 9.25. Within the past 12 months, CNC's P/CF has been as high as 10.44 and as low as 5.81, with a median of 7.19.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Centene is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, CNC feels like a great value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research