Fears about the health of the U.S. economy have led the S&P 500 index 13% lower so far in 2022. 

However, some stocks have tremendously outperformed the index. Up 24% year to date, health insurer Cigna (CI 1.19%) has crushed the S&P 500. Is the stock still a buy or has it run up too far, too fast? Let's take a look at the company's fundamentals and valuation to decide.

A solidly growing business

Earlier this month, Cigna released its financial results for the second quarter ended June 30. Once again, the company topped the analyst consensus estimates for revenue and non-GAAP (adjusted) diluted earnings per share (EPS).

Cigna reported $45.5 billion in revenue in Q2, which equates to a 5.4% year-over-year growth rate. For context, this was slightly higher than the $44.3 billion in revenue that analysts were expecting. For the 10th quarter in a row, Cigna surpassed the analyst consensus for revenue.

The company's total customer relationships increased 6.9% over the year-ago period to 191.3 million in the second quarter. Gains in pharmacy, U.S. commercial medical, international health medical, behavioral care, and dental care clients more than offset declines in U.S. government medical and Medicare Part D customers during the quarter. This larger client base explains how revenue edged higher.

Cigna generated $6.22 in adjusted diluted EPS during the quarter, which is equivalent to an 18.7% year-over-year growth rate. This trounced the average analyst adjusted diluted EPS estimate of $5.62. What was behind the company's ninth earnings beat out of the last 10 quarters?

Cigna's higher revenue base and a 20-basis-point expansion in non-GAAP net margin to 4.4% were the primary factors that drove adjusted diluted EPS upward. The other piece of the puzzle was a staggering 7.7% reduction in the company's outstanding share count to 318.3 million, which was due to share buybacks. 

Over the next five years, analysts believe that Cigna's adjusted diluted EPS will compound at 11.5% annually thanks to the health insurance industry's promising outlook and the company's huge share repurchase program. 

A pharmacist consults with a customer.

Image source: Getty Images.

Plenty of room for dividend growth

Cigna's 1.6% dividend yield is in line with the S&P 500's yield, so the stock doesn't jump out as an income stock. But that's because it really shines as a dividend growth pick. 

This is evidenced by the fact that Cigna's dividend payout ratio will come in around 19.5% in 2022, providing plenty of room for the dividend to grow. That's why I believe that dividend growth will exceed earnings growth moving forward, which should lead to an annual dividend growth rate in the teens. 

A bargain-bin valuation

Cigna is clearly a flourishing business. Surprisingly, the market isn't valuing it as such. This is made apparent by Cigna's forward price-to-earnings (P/E) ratio of 11.4, which is considerably less than the healthcare plans industry average forward P/E ratio of 16.7.

This sizable discount isn't for a lack of growth prospects: Cigna's expected 11.5% annual earnings growth is just about the same as the industry average of 12.6%. This is what positions the stock as an excellent buy for investors seeking a company with growing income.