Healthcare provider Cigna (NYSE:CI) was having a lackluster 2019 until the past three months; since then, its stock has been soaring more than 35%, soundly outperforming the S&P 500's 11% returns over that time. At a market cap of $76 billion and trading near its 52-week high, the stock's seen lots of bullishness of late, but whether it can continue that into 2020 is by no means a sure thing.

Let's take a close look at what it's been up to as well as the risks the company is facing to determine whether the stock is a good investment today.

The Express Scripts merger is paying off

Cigna's stock began soaring in October after hovering around its 52-week low. An attractive buy, it became even hotter when the company released its third-quarter results at the end of the month, which benefited from the acquisition of Express Scripts. In December 2018, Cigna finalized its purchase of Express Scripts, valued at $54 billion in a cash-and-stock deal for the pharmacy benefits manager; the deal has proven to be worth it thus far. 

Several employees sitting at a table and reviewing numbers

Image source: Getty Images.

In Q3, Cigna's sales of $38.6 billion increased 237% from the prior-year quarter, when the company recorded just $11.5 billion in revenue. The increase comes primarily from pharmacy revenue, which is due to the merger with Express Scripts. A year ago, Cigna recorded just $747 million in pharmacy sales for Q3, but this past quarter that number's soared to $26 billion. It's now the company's largest segment and accounted for more than two-thirds of Cigna's top line. The results trickled down to the bottom line as well, with Cigna's net income nearly doubling from $774 million in the prior-year quarter to $1.4 billion in Q3 2019.

The company beat expectations and also raised its forecast for adjusted earnings for 2019, bumping up its projections from a range of $16.60 to $16.90 per share up to $16.80-$17. The company also expects earnings per share to rise from 10% to 13% in 2020, which is also the annual goal the company has "over the long term." 

Healthcare uncertainty could weigh on the stock

One of the risks for healthcare stocks as a whole is the potential that greater transparency in the industry could put more scrutiny on insurers and hospitals, leading to lower prices. President Trump signed an executive order in November relating to the secrecy that exists in the industry, stating that "We believe the American people have a right to know the price of services before they go to visit the doctor." 

The new law would allow patients to see the rates that hospitals and insurers have negotiated. It would give patients the ability to shop around before going to a particular hospital, which could impact the revenue that healthcare providers like Cigna are able to generate. While the law may not come into effect until 2021 and will likely face opposition along the way, it's a risk that investors need to be aware of. Healthcare could become a key issue in the upcoming federal election, with a particular focus being on bringing down costs. That could have an adverse impact on Cigna being able to meet its long-term growth targets.

Why Cigna is a good buy despite the risks ahead

Although there is uncertainty ahead for the industry, Cigna remains a solid healthcare stock for investors to add to their portfolios. With Express Scripts having such a positive contribution to the company's results thus far, there's plenty of reason to be optimistic. Although Cigna is trading near its high, at just 16 times earnings and 1.7 times book value, the stock is a good value buy; a low PEG ratio of 0.91 confirms that.

Management's strong outlook for the future should give investors plenty of hope that the stock can continue building on its recent results and that its value will continue to climb. That growth and a reasonable valuation make Cigna a good stock to buy today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.