Update on CorVel
CorVel's stock has enjoyed a resurgence of late, and is currently trading near it's 52 week high. Yes, earnings have rebounded from a few tough quarters, although revenues remain essentially flat. What's really driving the numbers?
The stock repurchase program, although a potential cause, is not likely to have had much of an impact as no shares were bought in the most recent quarter.
No, it looks like CorVel has done a better job of managing the cost of goods sold, as their gross margin has improved substantially. It is likely that the company is focusing less on low-margin case management and more on high margin networks and technology-driven niches such as bill review.
SG&A expenses were up considerably; if they had held consistent with past quarters the profit picture would have been even rosier.
While the network business may be looking good for now, CorVel's strategy of contracting with as many providers as possible at very low discounts may have run its course. The company recently lost one network relationship (albeit in a small jurisdiction) and sources indicate it will lose additional business.
Comments
And Why may have Corvel's strategy of contracting with as many providers as possible at very low discounts run its course?
Are these pretty reliable sources that informed you that Corvel will be losing
additional business?
Posted by: J Chapman | October 25, 2006 8:29 PM
I have no idea why anyone would buy CorVel stock at 40, much less at 45. they are buying their stock back, have jacked up EPS, but revenues are down. Stock picking is by no means my forte; that said my take is this is purely speculation.
Re the sources, if I didn't think they were reliable I would not use their information.
Posted by: Joseph Paduda | October 25, 2006 9:40 PM