Since October 2024, Cigna has been in a holding pattern, posting a small loss of 1% while floating around $338.25. However, the stock is beating the S&P 500’s 6.9% decline during that period.
Is there still a buying opportunity in CI, or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free.
Why Does Cigna Spark Debate?
With roots dating back to 1792 and serving millions of customers across the globe, The Cigna Group (NYSE:CI) provides healthcare services through its Evernorth Health Services and Cigna Healthcare segments, offering pharmacy benefits, specialty care, and medical plans.
Two Positive Attributes:
1. Long-Term Revenue Growth Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Cigna’s 12% annualized revenue growth over the last five years was solid. Its growth beat the average healthcare company and shows its offerings resonate with customers. 
2. Economies of Scale Give It Negotiating Leverage with Suppliers
Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.
With $247.1 billion in revenue over the past 12 months, Cigna is one of the most scaled enterprises in healthcare. This is particularly important because health insurance providers companies are volume-driven businesses due to their low margins.
One Reason to be Careful:
Weak Customer Growth Points to Soft Demand
Revenue growth can be broken down into the number of customers and the average spend per customer. Both are important because an increasing customer base leads to more upselling opportunities while the revenue per customer shows how successful a company was in executing its upselling strategy.
Cigna’s total customers came in at 17.5 million in the latest quarter, and over the last two years, their count averaged 4.4% year-on-year growth. This performance slightly lagged the sector and suggests that increasing competition is causing challenges in landing new contracts. 
Final Judgment
Cigna’s merits more than compensate for its flaws, and with its recent outperformance in a weaker market environment, the stock trades at 10.8× forward price-to-earnings (or $338.25 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More Than Cigna
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