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We came across a bullish thesis on Centene Corporation on Compounding Zero’s Substack by Felix – My Investment Journal. In this article, we will summarize the bulls’ thesis on CNC. Centene Corporation’s share was trading at $41.90 as of January 28th. CNC’s trailing and forward P/E were 8.94 and 13.85 respectively according to Yahoo Finance.
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Centene Corporation operates as a healthcare enterprise that provides programs and services to under-insured and uninsured families and commercial organizations in the United States. CNC represents a deeply undervalued opportunity in the U.S. healthcare sector, trading at a steep discount to its intrinsic value despite operating in a massive, government-backed market. The company’s Medicaid-focused business, which accounts for 64% of revenue, is counter-cyclical, structurally protected by federal law, and supported by state-guaranteed capitation payments, providing stable, predictable cash flows with minimal customer acquisition costs.
Recent market fears—Medicaid margin compression, ACA Marketplace repricing challenges, PBM settlements, a $6.7 billion goodwill impairment, and political noise surrounding federal Medicaid cuts—are largely temporary, systemic, or already addressed; yet, they have driven CNC’s stock well below both book value and replacement-cost metrics. Even in conservative scenarios, Centene’s Medicaid business alone, combined with statutory capital requirements, implies a minimum enterprise value of $25.5 billion, versus a current market capitalization of $16.7 billion.
Historical patterns of Medicaid cost spikes and subsequent state rate resets further suggest that the current margin pressure is cyclical, with recovery expected through mid-2026 to early 2028. Centene’s core economics—highly profitable, low-risk, government-backed enrollment, entrenched provider networks, and strong free cash flow—remain intact, and its Marketplace and Medicaid adjustments have already been executed. Insiders have purchased shares during periods of peak pessimism, signaling confidence in recovery.
Considering replacement-cost floors, historical book multiples, and sector-average valuations, CNC offers 1.5× to 4× upside, with the timing for value realization anchored to documented regulatory and fiscal cycles rather than speculative catalysts. This combination of structural moats, legal protections, and cyclical clarity makes Centene a compelling deep-value investment with limited downside and multi-year upside potential.
Previously, we covered a bullish thesis on Molina Healthcare, Inc. (MOH) by Long-Term Pick in February 2025, which highlighted strong growth in the Marketplace, expanding Medicaid and Medicare contracts, and solid long-term revenue potential despite short-term operational pressures. MOH’s stock price has depreciated by approximately 29.84% since our coverage due to rising Medicaid costs and cash flow pressures. Felix – My Investment Journal shares a similar perspective but emphasizes Centene’s (CNC) deeply undervalued Medicaid-focused business, structural legal protections, and predictable, counter-cyclical cash flows.
Centene Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 72 hedge fund portfolios held CNC at the end of the third quarter which was 59 in the previous quarter. While we acknowledge the risk and potential of CNC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CNC and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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Disclosure: None.