Which of These Healthcare Stocks Has the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how these top healthcare stocks rank via earnings trends:

WellCare Health Plans, Inc. (NYSE:WCG): Current Price $60.52

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 6,522 6,878 5,440 6,107 7,409
Diluted EPS ($) -0.89 0.95 -1.26 6.10 4.22

We note a somewhat erratic record at WellCare, with both sales and EPS swinging widely.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 1,600 1,791 1,811 1,818 1,988
Diluted EPS ($) 1.96 1.18 1.06 0.87 1.11

Nonetheless, we are impressed with the sustained revenue growth over the last 5 quarters and the more or less steady EPS. We’ll keep WellCare on watch…

Coventry Health Care Inc. (NYSE:CVH): Current Price $46.38

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 11,730 13,900 11,590 12,190 14,110
Diluted EPS ($) 2.54 1.64 2.97 3.70 3.52

There’s nice growth between 2008 and 2012 on both revenue and EPS counts at Coventry Health Care.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 3,129 3,692 3,518 3,458 3,446
Diluted EPS ($) 0.64 1.20 0.65 0.78 0.88

Though quarterly revenue is flat, we like that EPS has grown quarter-over-quarter during September and December 2012. We’ll keep Coventry on our list…

Centene Corp. (NYSE:CNC): Current Price $46.02

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 3,365 4,103 4,448 5,341 8,668
Diluted EPS ($) 1.88 1.89 1.88 2.12 0.03

Revenue at Centene has been growing by leaps and bounds between 2008 and 2012. Unfortunately, EPS took a dive during 2012.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 1,507 1,712 2,111 2,448 2,397
Diluted EPS ($) 0.57 0.45 -0.68 0.07 0.17

Quarterly revenue is on an uptrend, but EPS has been rather patchy. We do note the improvement in EPS in the latest quarter there…

Health Net Inc. (NYSE:HNT): Current Price $27.74

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 15,370 15,710 13,620 11,900 11,280
Diluted EPS ($) 0.88 -0.47 2.06 0.80 1.46

Revenues at Health Net have been in a tailspin since 2009 and EPS rather erratic, though 2012 saw a sharp rise.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 3,194 2,830 2,841 2,780 2,827
Diluted EPS ($) 0.63 -0.32 1.48 0.22 0.06

Unfortunately, we have to drop Health Net from this analysis because of the sharp fall in its EPS over the last two quarters.

Conclusion

In thisĀ ”E-Squared” investment analysis of health care stocks, we pick Coventry Health Care over all the others because of its better EPS growth during the recent quarters.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!