The firm cited WellCare's disappointing second quarter results with margins down sharply across the board.
Cantor Fitzgerald believes the substantial amount of unfavorable development tends to be a harbinger of future underwriting problems.
Shares of WellCare are up 0.82% to $60.50.
TheStreet Ratings team rates WELLCARE HEALTH PLANS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate WELLCARE HEALTH PLANS INC (WCG) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 21.2%. Since the same quarter one year prior, revenues rose by 35.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, WCG has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs.
- In its most recent trading session, WCG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- WELLCARE HEALTH PLANS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, WELLCARE HEALTH PLANS INC reported lower earnings of $3.98 versus $4.22 in the prior year. For the next year, the market is expecting a contraction of 45.4% in earnings ($2.18 versus $3.98).
- You can view the full analysis from the report here: WCG Ratings Report