Last update on 2024-06-06

Centene (CNC) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Centene (CNC) scores 8/9 on the Piotroski F-Score for 2023, highlighting strong financial performance and potential undervaluation.

Short Analysis - Piotroski Score: 8

We're running Centene (CNC) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score for Centene (CNC) is 8 out of 9, indicating a strong financial position with good profitability, liquidity, and efficiency. Key highlights include a significant net income ($2.7 billion in 2023), a positive and growing cash flow from operations ($8.05 billion in 2023), and improved return on assets. The company has also improved its leverage and current ratio, reduced its outstanding shares, and maintained positive operating cash flow higher than net income. However, a slight decline in the gross margin was noted.

Insights for Value Investors Seeking Stable Income

Based on Centene's solid Piotroski F-Score of 8, strong financial metrics, and positive operational indicators, it appears to be a promising investment opportunity. The company’s consistent profitability, solid cash flow, and financial management make it worth looking into for potential investors. However, it's important to note the slight decline in gross margin and industry comparison, which should be considered before making any investment decisions.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Centene (CNC)

Company has a positive net income?

Net income signifies the overall profitability of a company after accounting for all expenses and taxes. A positive net income indicates net profitability, whereas a negative value reflects a loss. It is a significant criterion in assessing a company's performance and financial health over a period.

The net income for Centene (CNC) in 2023 stands at $2,702,000,000. This is a positive net income, which translates to the company being profitable for the fiscal year. Over the past 20 years, Centene has shown growing profitability with some fluctuations. Net income turned negative only in 2006 but has otherwise seen a general upward trend. Particularly notable is the jump from $1.2 billion in 2022 to $2.7 billion in 2023, a more than 100% increase, reflecting exceptional financial performance. Hence, a score of 1 is assigned for this criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the money a company generates from its regular business operations. A positive CFO indicates that a company is generating sufficient cash to maintain and grow its operations, crucial for long-term viability.

Centene (CNC)'s CFO for 2023 stands at $8,053,000,000, which is notably positive. This figure represents a robust increase, specifically from $6,261,000,000 in 2022 and a preceding figure of $4,205,000,000 in 2021. The positive trend suggests that Centene is maintaining strong operational efficiency and a healthy cash flow. Over the last 20 years, Centene's CFO has shown impressive growth from a modest $55,999,000 in 2003 to the current level, illustrating a solid and consistent upward trajectory.

Return on Assets (ROA) are growing?

An analysis of changes in Return on Assets (ROA) for Centene (CNC) demonstrates the company's efficiency in utilizing its assets to generate profit over time. The changes in ROA are a significant indicator of management effectiveness and operational profitability. This metric is crucial for investors seeking to gauge profitability ratios and make informed decisions.

Centene's ROA increased from 0.0155 in 2022 to 0.0335 in 2023, which is a substantial improvement and warrants a point in the Piotroski F-Score. This positive trend indicates enhanced operational efficiency and better utilization of assets to generate profit. For context, the industry's median ROA across the years has consistently stayed above Centene’s ROA levels. Specifically, in 2023 the industry median ROA stood at 0.1124, which is still significantly higher than Centene’s ROA of 0.0335. However, Centene’s relative improvement suggests an upward trajectory which might signal long-term growth potential.

Operating Cashflow are higher than Netincome?

The criterion checks if the operating cash flow is higher than net income, which indicates the company's earnings quality.

For Centene (CNC), the operating cash flow in 2023 was $8.053 billion, significantly higher than its net income of $2.702 billion. This is a good sign, as it suggests that the company is generating more cash from its operations than what is reported as profit. This positive trend has been consistent over the years, particularly notable in recent years like 2020 ($5.503 billion) and 2022 ($6.261 billion). This suggests strong cash flow generation, making the earnings less reliant on accounting adjustments and more sustainable long term. Therefore, Centene earns 1 point for this criterion.

Liquidity of Centene (CNC)

Leverage is declining?

Change in leverage is crucial as it reflects a company's debt usage relative to equity. Lower leverage is typically better as it indicates less financial risk.

Centene's leverage ratio decreased from 0.2741 in 2022 to 0.2196 in 2023. This is a positive trend, indicating that the company has reduced its reliance on debt. Historically, Centene's leverage was even lower before 2019, and the recent decrease suggests a move towards more conservative financial management. Thus, Centene gets 1 point for improved leverage.

Current Ratio is growing?

The current ratio measures the ability of a company to pay its short-term liabilities with its short-term assets, indicating financial stability and liquidity.

Centene's current ratio has slightly increased from 1.0585 in 2022 to 1.11 in 2023, adding 1 point to the Piotroski score. This increment, although small, represents an effort toward improving its short-term liquidity position. Compared to the industry median of 1.11 in 2023, Centene aligns precisely with its peers, crossing a notable threshold after dipping below the industry average in 2022. Looking back 20 years, Centene's current ratio fluctuated compared to the industry median—from a low of 0.8565 in 2003 to a high of 1.5715 in 2019. This historical perspective highlights the company's recurring efforts to maintain or boost its liquidity, particularly critical in an ever-evolving healthcare industry where meeting immediate obligations can be a determinant of operational continuity.

Number of shares not diluted?

Change in Shares Outstanding compares the volume of outstanding shares over time to evaluate stock dilution or share buyback activity.

The Outstanding Shares for Centene Corporation (CNC) decreased from 575,191,000 in 2022 to 543,319,000 in 2023. This reduction indicates a share buyback activity, suggesting that CNC is attempting to increase shareholder value by reducing the number of shares in circulation. This is typically viewed positively in Piotroski Analysis as it often leads to an increase in Earnings Per Share (EPS). Over the last 20 years, the trend has varied, showing both increases and decreases in shares outstanding. Notably, there was a significant increase between 2014 and 2016, while the trend from 2020 to 2023 shows more stability, with a recent decline. Therefore, adding 1 point for this criterion is appropriate.

Operating of Centene (CNC)

Cross Margin is growing?

Explains whether the gross margin for Centene (CNC) has increased or decreased in 2023 compared to 2022.

In 2023, Centene (CNC) has a gross margin of 0.1124, compared to 0.1152 in 2022, indicating a slight decrease. While the decline is marginal, it sets the gross margin for 2023 at 0, given there is no improvement.

Asset Turnover Ratio is growing?

Asset Turnover measures how efficiently a company uses its assets to generate sales. It's crucial for assessing operational efficiency.

From a numerical standpoint, Centene's Asset Turnover increased marginally from 1.8622 in 2022 to 1.907 in 2023. This increase signifies slightly improved efficiency in asset utilization to generate revenue. Historically, Centene's Asset Turnover has shown some volatility, peaking at 3.5357 in 2014 and hitting a low of 1.7129 in 2021. Despite the growth in 2023, the ratio remains considerably lower than its peak. Nevertheless, the uptick from 2022 to 2023 earns Centene 1 point in the Piotroski analysis, signaling a modest positive trend.