Does Centene’s 2025 Cash Flow Outlook Justify a Rebound After Its 35.6% Slide?

• If you are wondering whether Centene is a beaten down bargain or a value trap at current prices, this article will walk through what the numbers are really saying about the stock.
• Despite being down 35.6% year to date and 32.6% over the past year, the share price has shown some recent stability, with a 2.3% gain over the last week and 7.1% over the last month.
• Much of the recent price action has been shaped by shifting expectations around US healthcare policy and Medicaid redeterminations, which directly affect Centene's core managed care business. Investors have also been reacting to strategic updates, including portfolio streamlining and cost discipline, that aim to sharpen the company's focus on higher quality earnings and cash flows.
• Based on our checks, Centene scores a 5/6 valuation score, suggesting it screens as undervalued on most of the metrics we track. We will break down what that means across different valuation methods, before finishing with a more holistic way to think about what the market might be missing.

Find out why Centene's -32.6% return over the last year is lagging behind its peers.

Approach 1: Centene Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth today by projecting the cash it can generate in the future and discounting those cash flows back to their value in $ today.

For Centene, the latest twelve month Free Cash Flow stands at roughly $3.2 billion, providing a base of current cash generation. Analysts supply detailed forecasts for the next few years. Beyond that, Simply Wall St extrapolates the trend, with projected Free Cash Flow reaching about $5.6 billion by 2035. These ten year projections reflect moderating growth over time as the business matures but continues to scale.

When all those future $ cash flows are discounted back using a 2 Stage Free Cash Flow to Equity model, the estimated intrinsic value comes out at about $188.35 per share. Compared with the current market price, this indicates the stock is trading at roughly a 79.3% discount, based on this particular cash flow model for Centene.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Centene is undervalued by 79.3%. Track this in your watchlist or portfolio, or discover 910 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Centene.

Approach 2: Centene Price vs Sales

For a large, relatively low margin managed care business like Centene, the Price to Sales ratio is a useful yardstick because revenue is substantial, recurring and less volatile than earnings in any single year. Investors typically pay higher sales multiples for companies with stronger growth prospects and lower perceived risk, while slower growing or more uncertain businesses usually trade at lower multiples.

Centene currently trades on a modest 0.11x Price to Sales ratio, which is far below both the Healthcare industry average of about 1.34x and the peer group average of roughly 1.80x. Simply Wall St’s Fair Ratio framework goes a step further than these simple comparisons by estimating what Centene’s Price to Sales multiple should be, after accounting for its growth outlook, risk profile, profitability, industry positioning and market cap. On this basis, Centene’s Fair Ratio is 0.85x, which is still well above where the stock currently trades.

This suggests that even after adjusting for its specific risks and business characteristics, the market is pricing Centene at a meaningful discount to what its fundamentals imply.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1463 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Centene Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page that lets you spell out your story for Centene, translate that story into assumptions about future revenue, earnings and margins, and automatically connect those assumptions to a Fair Value that updates as new news or earnings arrive. You can then compare that Fair Value with today’s price and decide how Centene fits into your investment thinking. For example, one investor might build a bullish Centene Narrative around Medicaid margin recovery, steady 7 percent revenue growth and improving Marketplace profitability that results in a Fair Value near the high end of analyst targets around $70. Another might take a more cautious view that policy risk, contract losses and medical cost volatility cap earnings and lead to a far lower Fair Value closer to $24. Narratives makes those different perspectives, and their implications for your decisions, explicit and easy to track over time.

Do you think there's more to the story for Centene? Head over to our Community to see what others are saying!

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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