Aetna, A Healthcare Insurance Insurer!

Aetna (AET), a health care insurance company provides diversified benefits to its target market. The three major segments it operates in include Large Case Pensions, Group Insurance and Health Care. The health insurance company has showed strong results in the current fiscal year due to which investors are optimistic about the stock.
The company reported total revenues of $13 billion in 4QFY13 which is 33% increase year on year. Their Cash flows from operations (CFOs) in 4QFY13 were $624 million which were 14% higher (yoy). The total expenses for the current quarter were $12.4 billion which were 32% higher than the year ago quarter.
AET recently crossed its 200 day simple moving average when there were around 1.1 million shares traded. The stock was trading at 9.35 times the normal volume for the stock. AET stock is currently down 1.3% year to date. The stock has a dividend yield of 1.3% on Earnings of $5.34. The stock currently has a price to Earnings ratio of 12.68. The health care company has an average trading volume of 2.5 million shares per day in the last one month. Its current market capitalization is $24.5 billion.
The company has showed strong revenue growth in the last two years with Earnings also showing growth. Apart from growing organically, the insurance company has bought back shares more frequently resulting in robust EPS growth. Since 2010, EPS diluted for AET has increased around 90% premium to Net income growth which was around 50% in the same period. The numbers of shares outstanding have declined by over 20% in the same period which shows that the company has done buybacks quite frequently.
Aetna stock price as on 21st April 2014 was $67.77 which was a 3.01% decline from previous day’s closing price of $69.87. The stock witnessed a 52 week high of $76.71 on 21st March 2104. Since then, AET shares have declined 11.6%. As we move forward, the Aetna stock is expected to increase in value by 19.5%.
The company showed strong revenue growth than the industry average which was 10.4% contributing to strong Earnings growth. AET stock has increased in value by more than 23% since last year beating the S&P 500 rise over the same period. This current FY14, AET Earnings are expected to grow by 19% which is good news for investors and this trend should continue. The Net income for the health care company has soared in past one year increasing by more than 94%.
If we look at the competitors of Aetna, all are trading at a premium to AET. But given investors optimism in the company, the stock price will rise in the coming 12 months. The company’s operating margins are also at a premium to the industry’s margin of 5.6%.
Recently Aetna news came in when the company was fined $500,000 for using policy forms between 2002 and 2011 that wasn’t in accordance with the state consumer protection law. Following the news, the company announced that it will make sure that take steps to prevent such events in the future.

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