There's a line from the TV show Angel that I think might apply to investing: Bossy would-be diva Cordelia Chase describes true perfection as having "one tiny flaw for me to fix." See, on Wall Street, the "perfect" stories usually trade at inflated valuations, while many flawed but promising companies get driven down into bargain territory. While health benefits company Coventry Health Care (NYSE:CVH) is hardly perfect, investors could be in for a treat if management can shore up some of its weak spots.

Coventry's fourth quarter wasn't too shabby. Operating revenue rose more than 24%, as premiums climbed more than 9%. The company's commercial insured yield rose nearly 9%, and the overall medical loss ratio fell from 80.4 to 78.8 (lower is better). What's more, the medical loss ratio fell in each of the company's main lines of operation; this broad-based improvement compares favorably with the likes of WellPoint (NYSE:WLP), Humana (NYSE:HUM), and Aetna (NYSE:AET) -- though Aetna's was slightly better.

So how can the company improve? Well, membership growth between 1% and 3% for next year isn't exactly rocket-hot, though it's not too far out of line with the industry. Coventry's First Health business also remains a work in progress. Management still needs to stabilize this business and strip away costs before it can expect much real growth or improvement.

Assuming that the First Health fixer-upper continues on plan, within the next year Coventry will probably have to decide whether it's a buyer or a seller. There are smaller targets out there like Health Net (NYSE:HNT) and Magellan Health Services (NASDAQ:MGLN), but also companies like Humana and Aetna that may view Coventry as a way to boost their scale and national leverage.

Whatever the case may be on the M&A front, it looks like the stock is going to get marked down in the market today. A fierce sell-off might be an opportunity for investors willing to believe that Coventry management can continue to drive better enrollment, lower medical costs, and improvements in First Health.

For more Foolish thoughts on health benefits:

Coventry is a Motley Fool Stock Advisor pick. For more healthy selections from David and Tom Gardner, sign up today for a free 30-day trial subscription.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).