Investors track insider buying and selling activities to make investment decisions. Insiders are those holding more than 10% class of a company’s security, typically management, officers, or any beneficial owners.
Although insiders tend to have better insights into a company’s performance outlook as compared to the average investor, it would be wise to take it with a grain of salt. A broader view of the company’s financial performance could help investors make informed decisions.
Insider buying has increased in healthcare stocks, Centene Corporation (CNC), Precigen, Inc. (PGEN), and Beyond Air, Inc. (XAIR). While CNC could be worth buying, PGEN and XAIR might be best avoided.
The healthcare market is witnessing an unprecedented growth due to advances in medical science, being propelled by significant investment and research across the public and private sectors. The industry is evolving amid the use of digital medicine products, the development of personalized therapies, and deployment of advanced technologies.
Moreover, healthcare stocks offer investors a defensive hedge amid an uncertain market. But not all healthcare stocks are worth buying.
Stock to Buy:
Centene Corporation (CNC)
CNC operates as a multi-national healthcare enterprise that provides programs and services to underinsured and uninsured individuals. It operates through two segments, Managed Care and Specialty Services.
On March 29, 2023, Evolent Health, Inc. (EVH) announced an agreement to expand its Technology and Services solution for oncology with existing partner, CNC. CNC’s president, Ken Fasola, stated that the company looks forward to continuing to expand their strategic partnership in the years to come.
This agreement deepens the specialty care partnership between the two companies in the Medicare Advantage (MA) market.
In terms of the trailing-12-month EBITDA margin, CNC’s 4.36% is 107.4% higher than the 2.10% industry average. Likewise, its 1.75x trailing-12-month asset turnover ratio is 401.5% higher than the industry average of 0.35x.
CNC’s total revenues increased 14.7% year-over-year to $144.55 billion for the fiscal year that ended December 31, 2022. The company’s adjusted net earnings rose 10.6% year-over-year to $3.36 billion.
Its net cash provided by operating activities increased 48.9% year-over-year to $6.26 billion. In addition, its adjusted EPS came in at $5.78, representing a 12.2% increase from the prior-year quarter.
CNC’s EPS for the quarter ending March 31, 2023, is expected to increase 15.2% year-over-year to $2.11. The company has a creditable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 7.5% to close the last trading session at $68.07.
CNC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the A-rated Medical - Health Insurance industry, it is ranked #2 out of 10 stocks. The stock has a B grade for Value, Sentiment, and Quality.
In total, we rate CNC on eight different levels. Beyond what we stated above, we have also given CNC grades for Growth, Momentum, and Stability. Get all CNC ratings here.
Stocks to Avoid:
Precigen, Inc. (PGEN)
PGEN discovers and develops the next generation of gene and cellular therapies in the United States. The company operates through two segments, Biopharmaceuticals and Exemplar.
In terms of the trailing-12-month EBIT margin, PGEN’s negative 277.25% compares to the negative 2.05% industry average. Its negative 68.30% trailing-12-month Return on Common Equity compares to the industry average of negative 40.90%. Likewise, its negative 172.56% trailing-12-month levered FCF margin compares to the industry average of negative 3.37%.
PGEN’s operating loss narrowed by 17.6% for the fourth quarter ended December 31, 2022, to $75.73 million. Its total assets declined 40% year-over-year to $215.98 million.
PGEN’s EPS for the quarter ended March 31, 2023, is expected to remain negative. Over the past three months, the stock has fallen 47.8% to close the last trading session at $1.05.
PGEN’s POWR Ratings reflect bleak prospects. The stock has an overall rating of D, equating to a Sell in our proprietary rating system. It is ranked #343 out of 381 stocks in the Biotech industry. The stock has a D grade for Value, Stability, and Quality.
We have also given PGEN grades for Growth, Momentum, and Sentiment. Get all the PGEN ratings here.
Beyond Air, Inc. (XAIR)
XAIR operates as a commercial medical device and biopharmaceutical company. The company engages in the development of LungFit platform, a nitric oxide generator, and delivery system.
In terms of the trailing-12-month Return on Common Equity, XAIR’s negative 81.88% compares to the negative 40.90% industry average. Its negative 75.25% trailing-12-month Return on Total Assets compares to the industry average of negative 31.84%.
Likewise, its negative $32.47 million trailing-12-month cash from operations compares to the industry average of negative $23.68 million.
For the fiscal fourth quarter ended December 31, 2022, XAIR’s operating loss widened 87.1% year-over-year to $14.01 million. The company’s net loss attributable to XAIR widened 64.7% year-over-year to $12.75 million. Its net loss per share attributable to XAIR widened 48.3% year-over-year to $0.43.
XAIR’s EPS for the quarter ended March 31, 2023, is expected to remain negative. It has a bleak earnings surprise history, surpassing its consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has fallen 35.3% to close the last trading session at $6.05.
XAIR’s POWR Ratings reflect its grim outlook. It has an overall rating of D, which equates to a Sell. It is ranked #110 out of 138 stocks in the D-rated Medical - Devices & Equipment industry. In addition, it has a D grade for Momentum and Stability.
Click here to see the other ratings of XAIR for Growth, Value, Sentiment, and Quality.
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CNC shares were trading at $67.87 per share on Monday morning, down $0.20 (-0.29%). Year-to-date, CNC has declined -17.24%, versus a 8.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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