Corvel is falling
In what can best be described as a possible return of completely rational behavior, CorVel's stock is entering the stratosphere. From above.
The decline of the managed care company's stock price and market cap from levels that can best be described as "way too high" appears to be one of those all-too-rare instances of the market finally figuring out that just because a company's stock price is high does not mean it is worth it.
As I've noted before, CorVel's valuation was all out of whack. And I'd suggest it still is.
Let'ss review, shall we? CorVel talked about a stock buyback last summer that never really got going. That was followed by CEO Gordon Clemons selling 70,000 shares of stock, after which the stock price went up. Then, CorVel bought TPA Hazelrigg for $12 million, a 6x EBITDA valuation. Next, it's stock went up some more. (That's what really got me confused.) Then, analysts cut earnings projections, and the stock went up even further. Boy, was I confused.
Now comes word that CorVel's California TPA customers are terminating contracts for managed care services. Gee, that was a tough one to predict - a managed care company buys a TPA (Hazelrigg), and the TPAs that Hazelrigg competes with decided to stop buying managed care services from the new parent.
Talk about a bolt out of the blue!
Next, earnings were announced that bettered the year-ago quarterly numbers by a good bit. The stock declined.
Now, CorVel is trading at about $30 a share, down from a high of $48 and change in late December. Better, but the P/E is still a quite generous 26, a valuation typically reserved for high-flying growth stocks, not firms experiencing 6% annual growth.
What does this mean for you?
I have no idea.
Comments
Arlene Hazelrigg stopped paying benefits to nurses in 2002, making them "independent" after insisting they bill 10 hrs per day. I'll bet she laughed all the way to the bank when Corvel bought her out.
Posted by: Karen Gensler | February 28, 2007 9:44 PM
Joe, you are absolutely correct about Corvel! Unfortunately, their situation is not too uncommon in todays marketplace as we see more of the "big players" getting involved in business lines that will ultimately "shoot them in the foot" with who they want as clients. Is this not similar to the First Health/Coventry acquisition of Concentra? Will the net results not be the same when the clients figure out that the network is also the competitor??
Posted by: Dorrence | March 1, 2007 9:26 AM
I am sorry that you are in a dump of a situation.I am writing this on behalf of my husband for legal reasons since his employer has placed a Permanent Restraining Order against him unjustly to prevent him from notify corruptions of his employer, we are not even sure if this site is even a bonified site and not just a trap since the continuous harassments we have been receiving from his employer, this is his story: I used to work for a government agency as a Senior Scientist managed by no other than the husband of the TPA you purchased for $ 12 million dolors. I even called the son of the company's owner secretary and left a message for the company's owner. I knew several years before you purchased the TPA, they were the Risk Management and Workman's Compensation consultant as well as many other dirty functions they played for my employer and when I confronted my manager with this information that I stumbled on by accident he started retaliating against me and finally had me fired. I am one of the three scientist in State of California specialized in Chironomid Flies and Disease causing animals and insects, please try to explain to me how I lost my career. I wish you would have given me a call. I am still willing to help you not as a revenge but as the matter of principal, I have lost my career, reputation, they put a restraining order against me preventing me to be able to even bring grievance to my employer, they have down so much damage that there is not enough space for me to talk to you about. The most development and harassments and retaliation has been threatening phone calls and notes on my car, loss of my house that my wife and I worked so hard to built and possible return of my two daughters from B.Y.U at Provo Utah since we can not afford to pay their tuitions any longer. Wouldn't you wish your secretary would have given you my message as soon as message hit the news that Corvel have bought the you know who's company. You may email me at stglacvector@yahoo.com
Again I just want people of the los Angeles County to judge me for what I have done for their protection and the protection of their environment and how this corrupted government agencies with it's ties with everybody have destroyed my life. I am so scared that I don't even leave my house because I fear for my life and my family should not suffer like this.
Sincerely,
S. Tabatabaee
Posted by: Saed Tabatabaee | June 1, 2008 9:24 PM