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V. Gordon Clemons Jr. isn't a typical corporate bigwig. A self-described "radical right-winger from Idaho," he runs a small, little-known company that only one analyst bothers to cover. Yet he may be one of the country's savviest chief executives.
His company, CorVel (CRVL - Get Report), a provider of medical cost-containment services, has seen its shares soar more than 1,000% since it went public in 1991. It has posted consistent annual earnings growth of 15% or higher, and a 25% return on equity. Now the company is making a major push onto the Internet.
How has Clemons made a go of it? There are four key ways: by keeping a clean balance sheet, by setting up a decentralized workforce (only 12 of his 3,250 employees work at the company's headquarters), by investing in technology to address a changing landscape and, perhaps most important, by exploiting a growing niche. "There's no substitute for being in the right business," he says.
The company faces competition from Cigna's (CIG - Get Report) IntraCorp, First Health (FHCC) and closely held Concentra. But rising health care costs have sent companies scrambling for ways to keep expenses in line, so there's room for growth in the industry."The health-benefits sector is a nice growth area," says Marc Postiglione, the Bear Stearns analyst who covers CorVel's stock. Postiglione rates CorVel, at $32.88 a share, a "hold" on concerns that the stock is too highly valued. But Clemons, who notes that the company is buying back stock, begs to differ: "I don't think paying
Born to LeadClemons attributes his success with CorVel in part to the lessons he learned growing up in Idaho. His father was a hardworking farmer as well as "a bit of a madman inventor," he says, while his mother was a family friend of the Albertsons, who built the supermarket business in Boise.
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V. Gordon Clemons, Jr.
Tenure: Founded the company in 1988, took it public in 1991.
After getting an MBA from the University of Oregon, Clemons worked for Ford and then for FMC. However, "they eventually fired me for being such a jerk," Clemons says. He didn't want to raise prices at the chemical division he was running, and so he got ousted, he says. "I've always been stubborn about not compromising what you believe in, and that's why I'm running my own company," he adds. Clemons also worked at Cigna's IntraCorp, and was president of Caremark when Baxter International acquired the company in 1987. "I was the only guy who voted against the deal. When Baxter brought me in, they showed me a management chart and I wasn't on it. I figured it was time to move on," he says. Clemons founded Fortis in 1988 with funding from holding company North Star Universal. Fortis went public in 1991, changing its name to CorVel in 1992. The company initially targeted workers' compensation case management, but expanded into other areas. CorVel, headquartered in Irvine, Calif., now offers more than 1,500 customers a range of services, from vocational rehabilitation and medical-billing reviews to insurance. In its fiscal year ended March 2002, CorVel posted revenue of $235 million and net income of $1.30 a share -- up 13% and 15%, respectively. For the first half of this fiscal year, earnings rose 16% to 73 cents a share, and revenue climbed 17% to $135.7 million. Clemons doesn't offer earnings forecasts, but analyst Postiglione sees per-share earnings of $1.50 in 2003 and $1.73 in 2004. CorVel's books are debt-free, in part because it hasn't had to buy its growth through acquisitions. The company also generates lots of cash -- which represents 7% of its assets -- to fund its operations and organic growth initiatives. "This is a company that has done a lot of little things right, and one of the biggest is consistently investing in new technologies and looking for ways to build out services," Postiglione says.