QS Research · Michael Burry's Scion Capital analyst template · 2006
CENTENE CORP (CNC)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $70.19 (close 2026-11-10)
Conclusion: WATCH
Conviction low · base case -4% · downside -40% · upside +60%
The market is not missing the recovery: at $70.19 the stock is 23.8x TTM GAAP net income of $1.46B and 1.56x book for a 6.6% ROE (N27, N28, N25), so the independent 22.9x anchor gives a base of about $67.54, -4% (N43). The 2026-10-27 guidance raise to >$5.20 adjusted EPS and >$3.46 GAAP with HBR 90.4%-91.1% is real, but 2027 headwinds—Medicaid enrollment down 8%-9%, Part D margins at 2%-3% and weaker 2027 Star ratings—mean I do not assume a higher multiple. I keep section 13's TTM net-income base; the N34 adjusted TTM figure of -$5.26B is not a clean add-back because the impairment sits in FY2025. My downside assumes TTM net income falls 30% to $1.02B and is priced at the code's compressed ~20.2x, about -40%; my upside assumes the ~$4.70 recurring adjusted EPS implied by the >$5.20 guide less ~$0.50 non-recurring (S82) at today's 23.8x, about +60%. With base -4%, downside -40% and upside +60%, this is a watch: interesting, but not yet a long because the base has no margin of safety and the downside is worse than -25%.
Key numbers
- Share price: $70.19
- Market cap: $34.75B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $203.90B
- P/E (TTM): 23.8x
- Price / book: 1.56x
- Earnings-quality flags (TTM): Impairments $6.72B (460% of net income)
- Revenue growth (latest fiscal year): +20.0%
The 15 boxes
- ✓ 1. Long-form business notes
Centene is a managed-care insurer that earns premiums by covering Medicaid, Medicare and Marketplace populations and pays providers through fee-for-service, capitation and value-based arrangements. The latest FY2025 10-K shows four segments, with Medicaid 57%, Commercial 21%, Medicare 19% and Other 3% of external revenues, and 27.6M members at Dec 31 2025. The FY2020 report had only Managed Care and Specialty Services, so the WellCare deal and later portfolio moves shifted scale and mix to Medicaid/Medicare/Marketplace. XBRL shows FY2025 net loss of $6.67B but TTM to Sep 2026 net income of $1.46B; no one-off breakdown is provided.
- ✓ 2. Competitive advantage
The filings show a scale player in a commodity-like, re-bid government business, not a moat-protected franchise: management's own claim is only that "we believe" scale and provider relationships position it to compete, and the award criteria named in the 10-K (quality of care, network access, administrative efficiency, financial strength) are things rivals can match. The margin record is thin and volatile: gross profit fell to $14.21B in FY2025 from $17.07B in FY2024 while revenue rose to $174.58B from $145.50B, and operating income swung from +$3.17B (FY2024) to -$7.62B (FY2025) before recovering to $1.01B on a TTM basis to 2026-09-30. Barriers that do exist are regulatory (complex licensure, statutory capital) and contractual-contestable (Texas and Georgia Medicaid reprocurements lost and under protest), with quality scores (Star ratings) and PDP bid pricing as the visible competitive scorecards.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended Sep 30, 2026) is a shrinking book with flat margins and a GAAP loss: membership fell 8% year over year to 25.7 million, total revenues rose 2% to $50.6 billion, HBR was unchanged at 92.7%, and GAAP diluted EPS was $(0.14) against adjusted diluted EPS of $0.58. Operating cash flow was a $3.7 billion outflow on pass-through payment timing, medical claims liabilities were $21.5 billion with days in claims payable of 48, and total debt fell to $15.5 billion after $558 million of notes were repurchased in the quarter. The same-quarter release raised FY2026 adjusted diluted EPS guidance to greater than $5.20 and lowered the HBR range to 90.4%-91.1%. The 10-Q reports no material change to its risk factors.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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