Amerigroup Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Medicaid coverage provider Amerigroup (NYSE: AGP  ) sank as low as 25% on Friday after its quarterly results disappointed Wall Street. 

So what: Hurt by a one-time charge associated with a premium adjustment in Georgia, Amerigroup posted a second-quarter profit of $0.83 per share, down from $1.31 per share in the year-ago period. The shares have been on a tear in recent months, up 50% in 2011 alone, so it's no surprise that the earnings drop is triggering Amerigroup's biggest share price sell-off in years.

Now what: I wouldn't be so quick to pounce on this sell-off. The Georgia issue has raised a cloud of uncertainty over the space, with Medicaid-dependent insurers WellCare (NYSE: WCG  ) and Centene (NYSE: CNC  ) also experiencing big losses today. Add the fact that higher-than-expected operating costs and a health-benefits ratio also led Amerigroup to miss estimates on an adjusted basis, and it's an easy decision to stay away.

Interested in more info on Amerigroup? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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