Centene CorporationCNCNYSE

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DCF Valuation

⚠️Model Warnings

•Terminal value represents 90% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Strong Buy

Fair Value: $1,046.97 per share(market-calibrated)

+2289.3%

Upside to Fair Value

Current

$43.82

Pure Model

$1,208.28

Fair Value

$1,046.97

Bull Case

$1,406.45

Bear Case

$1,070.71

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $1,208.28.

What's Driving This Ratingfor CNC

✓

CapEx already efficient

CapEx at 0.42% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 1.27% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $31.3B (13.86% margin).

→

Moderate revenue growth

Analyst consensus projects -2.61% revenue growth, fading to 3.00% by Year 10. Revenue reaches $226.1B (vs $194.8B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 75.10% indicates efficient cash generation. FCF reaches $24.7B by Year 10 (10.94% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.49

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)6.70%

Cost of Debt

Pre-tax Cost of Debt3.66%

Tax Rate21.00%

After-tax Cost of Debt2.89%

Equity Weight (E/V)53.40%

Debt Weight (D/V)46.60%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (53.40% × 6.70%) + (46.60% × 2.89%)

= 5.50%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$189.7B	$196.6B	$199.5B	$208.3B	$226.1B
EBIT	$2.4B	$2.5B	$2.5B	$16.7B	$31.3B
Tax	$505M	$523M	$531M	$3.5B	$6.6B
NOPAT	$1.9B	$2.0B	$2.0B	$13.2B	$24.8B
+ Depreciation	$1.3B	$1.4B	$1.4B	$1.5B	$1.6B
- Capex	$803M	$833M	$845M	$882M	$958M
- Δ NWC	-$508M	$616M	$362M	$470M	$659M
Free Cash Flow	$2.9B	$1.9B	$2.2B	$13.3B	$24.7B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$2.8B	$1.6B	$1.7B	$9.1B	$14.5B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$24.7B

Terminal Growth Rate3.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$1.0T

PV of Terminal Value$596.6B

Exit Multiple Method

Year 10 EBITDA$32.9B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$790.4B

PV of Terminal Value$462.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$64.6B

PV of Terminal Value$596.6B

Enterprise Value$661.2B

(-) Net Debt$889M

Equity Value$660.3B

Shares Outstanding491M

Price per Share$1,344.59

Exit Multiple Method

PV of Projected FCFs$64.6B

PV of Terminal Value$462.7B

Enterprise Value$527.3B

(-) Net Debt$889M

Equity Value$526.4B

Shares Outstanding491M

Price per Share$1,071.98

Pure Model Fair Value

$1,208.28

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
3.50%	$1,556.07	$1,488.81	$1,424.79	$1,363.83	$1,305.78
4.50%	$1,319.34	$1,488.81	$1,424.79	$1,363.83	$1,305.78
5.50%	$1,030.51	$1,104.59	$1,208.28	$1,363.83	$1,305.78
6.50%	$853.58	$893.27	$944.30	$1,012.35	$1,107.60
7.50%	$729.64	$753.52	$782.71	$819.20	$866.12

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$1,070.71

2343.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.61

Base Case

$1,208.28

2657.4% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.49

Bull Case

$1,406.45

3109.6% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.41

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-2.61%

Year 3 Revenue Growth3.23%

Year 5 Revenue Growth1.85%

Year 7 Revenue Growth2.31%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin1.27%

Terminal EBIT Margin20.00%

Tax Rate21.00%

Historical Capex / Rev0.42%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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