Cigna (CI), mcap=$93bn, price $303 vs $278

$CI pitch:
– Health insurer – overlooked by investors.
– Cheaper (11x PE) than peers.
– In an industry that benefits from the tailwind of an aging population and is largely immunized from economic cycles.
– Peers $UNH, $ELV, and $HUM have long captured the imaginations of growth investors and now trade at higher valuations while offering only slightly better EPS growth.
– Cigna guides to 10%-13% long-term EPS growth and has delivered 15% over the past 11 years.
– Set to re-rate through its conservative guidance and beat-and-raise model.
– Compounder that has trounced the S&P 500 and Nasdaq over the past decade.

$CI valuation:

– Trades at 12x 2022E and 11x 2023E EPS.
– At below peer valuation of 18x 2023 EPS would be $455/stock.
– At 14x EBITDA (in line with industry deals) $CI is worth $382/share.

Exp. gain: +65% to $455/share.

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