Insurer Coventry Health Care (NYSE:CVH) managed to hit analyst expectations for earnings and revenues for the first quarter as its core commercial products turned more profitable. It looks like Coventry has stabilized, with the managed-care portion of the business turning in revenues that increased 18% over last year.

Coventry reported increasing membership in its plans. We probably shouldn't be too surprised by that. Health insurers and managed-care providers have been regularly reporting increased numbers this quarter. Amerigroup (NYSE:AGP) came out just the other day with higher membership numbers, as have Molina (NYSE:MOH), WellCare Health Plans (NYSE:WCG), and Aetna (NYSE:AET).

Moreover, Coventry has been acquiring business from competitors. Last quarter, it completed its acquisition of Concentra's workers' comp managed- care services, and the day before the earnings release it announced it was solidifying its commercial business by buying Mutual of Omaha's commercial employer group health business in Nebraska and Iowa as well as its national Federal Employees Health Benefits administration business. That will add about 215,000 members to its rolls and give it a big presence in the Midwest.

Acquisitions have been an increasingly strategic part of Coventry's growth strategy. In 2005, it bought First Health Group for $1.6 billion, which added HMOs and managed-care business in all 50 states. While Coventry has said that acquisitions are a priority for its use of cash, ahead of share buybacks, with a spate of mergers occurring in the industry, the price tag for future deals may rise. That may lead to Coventry actually considering repurchasing its shares at some point to increase shareholder value.

Its stock is trading at around 13 times 2008 earnings, putting the company in the middle of the competition, even though its has lower growth expectations over the next few years. That would make Coventry's price a little high at this level. Although the commercial business is expanding nicely and has been performing well (and should continue to do so), I'd think waiting for a better price would be a healthier decision for investors.

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.