We recently compiled a list of the 10 Most Profitable Value Stocks To Invest In. In this article, we are going to take a look at where The Cigna Group (NYSE:CI) stands against the other most profitable value stocks to invest in.
Rotating Back to Value Sectors is the Better Option
Value investing is essentially focused on looking at stocks trading at a discount to their intrinsic value. Such stocks happen to be more mature, less volatile, and have strong fundamentals. 2024 has been significant for defensive and value stocks, especially considering that growth stocks have been trading at high valuations all year round. Analysts expect the Magnificent Seven to shed their valuation significantly and investors continue to remain cautious amid a turbulent market environment.
On October 22, Brian Mulberry, Zacks Investment Management client portfolio manager, joined Wealth! on Yahoo Finance to discuss his market thesis and share why he prefers value stocks over growth stocks under the current macroeconomic backdrop. The S&P 500, in terms of the broader market, is currently trading at 22 times its forward earnings. Speaking of the magnificent seven, their valuations are getting a bit “top-heavy” and have been consistently trading between the mid to high 30s, adds Mulberry.
READ ALSO 10 Stocks with Consistent Growth to Buy and 8 Most Undervalued Value Stocks To Buy According To Analysts.
On the flip side, looking at utilities’ earnings growth and forward P/E, these companies are trading at a FWD P/E of only 9 or 10. Additionally, within these sectors, multiple better-performing individual stocks are expected to post sustainable or “durable earnings growth.”
Mulberry suggests that investors can do much better at current valuation levels if they are rotating back to some traditional sectors and value stocks. He adds that the big banks also expect to report strong earnings and will continue to do so as the interest rates go down even further in 2025.
Value stocks not only have stronger fundamentals, but they also have legacy businesses with sustainable business models. With the current backdrop of uncertainty, many analysts and strategists alike believe that low-risk and value businesses are the best bets for investors. That said, let’s take a look at the 10 most profitable value stocks to invest in.
Our Methodology
To come up with the 10 most profitable value stocks to invest in we used the Finviz stock screener to identify stocks in value-oriented sectors like consumer staples, financials, energy, healthcare, and more, with forward PE ratios of less than 15, positive 10-year revenue growth rates, and positive trailing 12-month net income. We then examined the hedge fund sentiment of each stock and picked the most popular ones. Our list is in ascending order of the number of hedge fund holders as of Q2 2024 primarily and 10-year revenue growth rates, forward P/E, and TTM net income secondarily.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A smiling healthcare professional, treating a patient with the PLEX platform.
The Cigna Group (NYSE:CI)
Number of Hedge Fund Holders: 66
Forward P/E as of October 23, 2024: 11.1
10 Year Revenue Growth Rate: 20.5%
Trailing 12 Month (TTM) Net Income (June 30): $3.71 Billion
The Cigna Group (NYSE:CI) is a managed healthcare and insurance company that ranks second on our list of the most profitable value stocks to invest in. The company serves its customers through two segments, Cigna Healthcare and Evernorth Health Services. Cigna Group provides health services to more than 178 million customers across 30 countries and jurisdictions. Some of its services include health insurance plans, individual insurance plans, family plans, dental plans, and related medical plans.
Thanks to its diversified portfolio, the company delivered strong financial results in the second quarter of 2024 and expects to carry forward the trend in Q3 2024. During the second quarter of 2024, The Cigna Group (NYSE:CI) generated $60.5 billion in revenues, up by 25% year-over-year. Revenue was primarily driven by its growth in Evernorth Health Services. Adjusted income from operations, on the other hand, grew by 5% year-over-year.
Speaking of customer relationships, The Cigna Group (NYSE:CI) witnessed an increase in customers by 13% to reach 186.2 million, from December 31, 2023. Its customer relationships consist of people covered under a medical insurance policy, a managed care arrangement, or a service arrangement issued by Cigna. For the full year 2024, the company expects revenues to reach at least $235 billion and projects adjusted income from operations to reach at least $8.07 billion.
The Cigna Group (NYSE:CI) immensely benefits from its diversified business model and expansive customer base. The company is extremely focused on maintaining strong customer relationships and acquiring new ones in different markets. In addition to that, the stock is currently trading at 11 times its forward P/E, a discount of 47% to its sector median. Analysts polled by Yahoo Finance expect CI to increase earnings by nearly 14% this year.
Overall CI ranks 2nd among the 10 most profitable value stocks to invest in. While we acknowledge the potential of CI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.