Cigna trades at $298.08 and has moved in lockstep with the market. Its shares have returned 7.6% over the last six months while the S&P 500 has gained 8.4%.

Is now a good time to buy CI? Find out in our full research report, it’s free.

Why Does Cigna Spark Debate?

With roots dating back to 1792 and serving millions of customers across the globe, The Cigna Group (NYSE: CI) provides healthcare services through its Evernorth Health Services and Cigna Healthcare segments, offering pharmacy benefits, specialty care, and medical plans.

Two Positive Attributes:

1. Long-Term Revenue Growth Shows Momentum

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Cigna’s 11.3% annualized revenue growth over the last five years was decent. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers.

2. Economies of Scale Give It Negotiating Leverage with Suppliers

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $277.7 billion in revenue over the past 12 months, Cigna is one of the most scaled enterprises in healthcare. This is particularly important because health insurance providers companies are volume-driven businesses due to their low margins.

One Reason to Be Careful:

Declining Customer Base Reflects Product and Sales Weakness

Revenue growth can be broken down into the number of customers and the average spend per customer. Both are important because an increasing customer base leads to more upselling opportunities while the revenue per customer shows how successful a company was in executing its upselling strategy.

Cigna’s total customers came in at 16.62 million in the latest quarter, and over the last two years, their count averaged 9.8% year-on-year declines. This performance was underwhelming and shows the company lost deals and renewals. It also suggests there may be increasing competition or market saturation.

Final Judgment

Cigna has huge potential even though it has some open questions, but at $298.08 per share (or 9.5× forward P/E), is now the time to initiate a position? See for yourself in our full research report, it’s free.

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