There's no shortage of investable health-plan companies out there, and likewise no shortage of opinion on who is best. Some folks like UnitedHealth
This has been a very tough stretch for these managed-care companies, but WellPoint has come through relatively well. And it certainly doesn't hurt that the second quarter's numbers looked reasonably good. Revenue was up about 27% as reported, and up in excess of 10% on a comparable basis (netting out the impact of a large acquisition). Likewise, growth in income was pretty good this quarter.
Turning to enrollment and medical costs, the news isn't quite so positive, though it's still arguably better than what we've now seen from others like Aetna
On the cost side, the reported medical loss ratio was higher than last year (that's bad), but actually down a bit when adjusted for the deal (that's good). Moreover, the company continues to project that medical cost trends will remain below 8%, which seems to be the magic number for analysts and institutional investors these days.
Having liked WellPoint before, I still like it now. I think there's quite a bit of potential here, and though Aetna may be even cheaper, investing there carries a higher level of risk and uncertainty. I'm not suggesting that WellPoint will be able to fully resist industrywide difficulties in pricing, enrollment growth, and/or medical costs if that's the way the wind blows, but I do still believe this is a stock worth some consideration.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
