Cigna Group (CI, Financial) experienced a notable stock decline of 5.31%, closing at $315.74. This drop came amid significant sector-related announcements, notably on a day when the S&P 500 index posted gains exceeding 3.2%.
The decline in Cigna's (CI, Financial) stock was primarily triggered by a new executive order from President Trump, targeting pharmacy benefit managers (PBMs) that play a role in drug pricing negotiations. The order mandates a reduction in drug prices within 30 days and seeks to eliminate PBMs, which President Trump referred to as "the famous middlemen."
Adding to the pressure, proposed legislation by the House of Representatives may alter the compensation framework for PBMs, such as Cigna's Express Scripts. With the current Republican majority in both the House and Senate, the probability of this bill becoming law is considerable. Other companies with PBM operations, like CVS Healthcare and UnitedHealth Group, saw their stocks similarly impacted.
Now, looking at the financials, Cigna (CI, Financial) appears to be in a stable position despite the broader market challenges. The company's valuation metrics indicate several healthy aspects. Cigna's Piotroski F-Score of 8 is a positive sign of financial strength, suggesting robust financial health. The company also showcases a Beneish M-Score of -8.22, implying it's an unlikely manipulator.
In terms of valuation, Cigna's PE ratio stands at 17.48, nearing a 1-year low, making it an attractive proposition for value-focused investors. According to GF Value, Cigna is considered to be "Modestly Undervalued" with a GF Value of $440.67, which suggests potential upside opportunities for long-term investors.
Furthermore, Cigna's (CI, Financial) other fundamentals, such as a cash flow yield of 7.13% and an EBITDA growth of 38.6% year-on-year, indicate strong operational performance. Nevertheless, investors should keep a keen eye on legislative developments that could significantly impact Cigna's business model related to its PBM services.
While Cigna's stock price is close to its 10-year high as noted by the warning signs, the company's financial health, combined with its current valuation status, presents a mixed but cautiously optimistic outlook for potential investors.
