CorVel's Clemons Quietly Shines
This is the second in a seven-part series profiling Good CEOs. To read more about TheStreet.com's Good CEO Portfolio, click here.
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), 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) 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 [a price-to-earnings multiple] of 20 or so is overpaying, but we don't try to sell people on that point."
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.
|The Good CEO Portfolio
V. Gordon Clemons, Jr.
Tenure: Founded the company in 1988, took it public in 1991.
The Next StepOne-fourth of all health care costs go to administration, and that has been a boon for CorVel. But Clemons says administrative costs will continue to drop as technology and automated services improve. "Our prices have been under pressure for the past 15 years," he said. So the CEO has positioned CorVel to benefit from a surge in transactions to offset a drop in margins. A linchpin of that strategy -- and a big component of the company's technology spending -- has been the Internet. The centerpiece of the company's Internet strategy is CareMC.com, its three-year-old claims-management Web site. "CareMC has been a big success, helping to drive revenue to other areas of CorVel," Postiglione says. CorVel sees the site becoming a portal for health care management services -- offering the services of CorVel as well as its competitors. "The nice thing about the Internet strategy is it takes what we already do to the next level -- giving the adjuster the ability to approve bills; bills getting paid online," Clemons says. Clemons envisions some bumps in the next few years in making his Web dreams into reality, but he says the company has the infrastructure to make it work. "We try not to hype that and keep it out of the stock, but behind closed doors we're very excited about it," he says. These may sound like pie-in-the-sky Web plans, but analyst Postiglione, who concedes that CorVel has proved him wrong time and again in its ability to post sharp growth, said, "Gordon is very conservative. He tends to not bet the ranch on things."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV