Should you buy CNC shares? Humana reportedly wants to buy Centene

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Sep 17, 2021
  • Centene shares on Friday surged more than 4% on rumors Humana is planning to buy.
  • Reports said a Humana private jet was spotted near Centene's headquarters in St. Louis.
  • Centene has a market cap of about $37.34 billion and trades at an attractive forward P/E ratio of 10.69.

On Friday, Centene Corp (NYSE:CNC) shares surged more than 4% in the morning after reports emerged suggesting American health insurance company Humana Inc. (NYSE:HUM) was planning an acquisition. StreetInsider pointed to speculative chatter that a Humana private jet was spotted near Centene’s headquarters in St. Louis.

Centene shares pulled back slightly to a net intraday gain of about 3.70% after the acquisition reports faded at around mid-afternoon. Centene shares have experienced choppy trading sessions this year, with the stock peaking at $75.00 per share in July before plunging to $59.00 last week. As a result, CNC shares are up just 2.92% this year.

Should you invest in Centene shares now?

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From a valuation perspective, Centene shares trade at an attractive forward P/E ratio of 10.69, making the stock a compelling option for value investors. Moreover, analysts expect its earnings per share to grow at an average annual rate of about 11.28% over the next five years. 

In comparison, the company’s EPS grew at a compound annual growth rate of 16.60%. Therefore, it seems CNC could experience a slowdown in earnings growth over the next five years compares to the previous period. 

As a result, growth investors may opt for alternatives in the market. However, with Humana potentially snooping for an acquisition, the stock price could spike significantly if the reports come to fruition.

Therefore, it could be worth watching how the story develops in foreseeable future. 

Source – TradingView

Does the Centene stock rebound has room left to run?

Technically, Centene shares appear to have recently bounced off the current 5-month lows to break out of a descending channel formation. However, the stock price is far from reaching overbought conditions and still trades several levels below the 100-day moving average.

Therefore, investors can target extended rebound profits at approximately $65.93 or higher at $67.87. On the other hand, if the stock pulls back following Friday’s spike, it could find support at $62.45 or lower at $60.50.

Bottom line: could you still buy the CNC rebound?

In summary, although CNC shares are up 3.70% on rumors Humana could be planning to buy, the stock is yet to reach overbought conditions of the 14-day RSI. Moreover, Centene trades at an attractive forward P/E ratio of 10.69, making it attractive to investors.

Therefore, with rumors of an acquisition still swirling around, it may not be too late to buy the CNC stock rebound.

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