Assessing CorVel (CRVL) Valuation Following Robust Earnings Growth and Rising Profitability

CorVel (CRVL) just released its latest quarterly results, revealing higher sales and growing net income compared to last year. The company’s performance suggests continued operational momentum, which is catching the eye of investors.

See our latest analysis for CorVel.

CorVel’s latest earnings beat comes after a string of active months, including a fresh share buyback and a sizable shelf registration filing. Yet, despite the company’s stronger profits and buyback activity, momentum has been challenged with a 1-year total shareholder return of -35.5% and the share price sliding over 32% year-to-date. That longer-term lens still reveals impressive compounding, however, with a five-year total shareholder return above 140%. This is evidence that patient investors have been rewarded even as near-term sentiment has faded.

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Despite the recent pullback, CorVel’s solid earnings growth and significant buyback efforts raise a critical question for investors: is there hidden value at today’s levels, or is future potential already reflected in the price?

Price-to-Earnings of 36.1x: Is it justified?

CorVel currently trades at a price-to-earnings (P/E) ratio of 36.1x, placing it notably above the US healthcare industry average of 22x. The stock’s latest close at $74.17 reflects a premium, and investors must consider whether this valuation can be sustained by future growth.

The price-to-earnings ratio measures how much investors are willing to pay for each dollar of earnings, making it a widely used metric for profit-generating companies like CorVel. For the healthcare sector, where steady earnings and growth are often prioritized, a higher-than-average P/E can signal either strong expected results or excessive optimism.

CorVel’s earnings expanded by 29.2% over the past year, outpacing both the broader industry and the company’s own long-term track record. While this rapid growth might justify a premium multiple, the market’s current pricing appears to suggest that similar outperformance will be sustained or even improved upon. Compared to industry peers at 22x and a peer average of 56.4x, CorVel sits in the middle, not the highest but still at a level where future performance will need to align with optimistic expectations.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Earnings of 36.1x (OVERVALUED)

However, persistent share price declines and a premium valuation could signal investor skepticism about CorVel’s ability to sustain rapid earnings growth in the future.

Find out about the key risks to this CorVel narrative.

Another View: SWS DCF Model Suggests Undervaluation

While the price-to-earnings ratio hints at a lofty valuation, our SWS DCF model presents a different take. According to this approach, CorVel’s fair value estimate is $88.11, about 16 percent higher than its current share price. Does this mean the market is underestimating CorVel’s true worth?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CorVel for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 879 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own CorVel Narrative

If you’re not convinced by these perspectives or want to dive deeper yourself, you can quickly craft your own narrative and reach your own conclusions in just a few minutes. Do it your way

A great starting point for your CorVel research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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