NEW YORK (TheStreet) -- Health care stocks are soaring today, after the Supreme Court ruled in favor of Obamacare.
With the abundance of mergers and acquisitions in the sector, we had a feeling the Supreme Court would hand President Obama one of his greatest accomplishments as commander-in-chief. A week ago, we recommended these health insurance companies: MetLife, Inc. (MET), Torchmark Corporation (TMK), and Lincoln National Corporation (LNC).
So, what are the best managed health care companies investors should be buying? Here are the top four, according to TheStreet Ratings,TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which managed health care companies made the list. And when you're done, be sure to read about which volatile aerospace and defense stocks to buy now. Year-to-date returns are based on June 24, 2015, closing prices. The highest-rated stock appears last.CI data by YCharts
YCharts are based on June 24, 2015, closing prices. The stock is up 2.48% today.
4. Cigna Corporation CI
Rating: Buy, A+
Market Cap: $43.3 billion
Year-to-date return: 61%
Cigna Corporation, a health services organization, provides insurance and related products and services in the United States and internationally.
"We rate CIGNA CORP (CI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 13.0%. Since the same quarter one year prior, revenues rose by 11.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market, CIGNA CORP's return on equity exceeds that of both the industry average and the S&P 500.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 72.67% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- CIGNA CORP has improved earnings per share by 6.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CIGNA CORP increased its bottom line by earning $7.82 versus $5.20 in the prior year. This year, the market expects an improvement in earnings ($8.54 versus $7.82).
- You can view the full analysis from the report here: CI Ratings Report