Stock (Symbol) |
Express Scripts (ESRX) |
Stock Price |
$77 |
Sector |
| Healthcare |
Data is as of |
| June 10, 2016 |
Expected to Report |
| Jul 26 – Aug 1 |
Company Description |
 ESRX is a pharmacy benefit management company. ESRX offers a range of services to its clients, which include managed care organizations, health insurers, third-party administrators, employers, union-sponsored benefit plans, workers’ compensation plans and government health programs. ESRX has two business segments: PBM and Other Business Operations. ESRX PBM segment involves management of outpatient prescription drug utilization to drive pharmaceutical care. Under the Other Business Operations segment, the company operates two additional brands through its subsidiaries: CuraScript Specialty Distribution, which distributes specialty pharmaceuticals and medications to treat rare and orphan diseases directly to providers, clinics and hospitals in the United States, and Matrix GPO, which supports the needs of its membership. ESRX subsidiary United BioSource provides consulting services for pharmaceutical manufacturers. Source: Thomson Financial |
Sharek’s Take |
 Pharmacy Benefit manager (PBM) Express Scripts (ESRX) is such a deal right now that when I look at the numbers I feel like doubling my position in the stock. But its largest client Anthem threatened to not renew their contract which ends in 2019 unless ESRX provides an additional $3 billion in drug savings, so the stock is laced with uncertainty. My take? Anthem is just looking for a better deal. There’s just three big PBM players: ESRX, CVS Caremark and United Health’s OptumRX. United Health is a competitor to Anthem, so that’s out. So the only place Anthem could turn to is Caremark, but in the end ESRX should be able to negotiate a new deal. ESRX’s President pointed out “I can’t think of a time, with any client, where we’ve had a contractually defined price review where we’ve reached a point where we couldn’t ultimately settle it out“. I’ve owned this stock for more than a decade, and never recall it having a down year in profits. It has consistently churned out double-digit profit growth. What’s more is the stock only sells for 12x earnings now, and with profit growth expected to accelerate to 19% two and three qtrs from now ESRX has solid upside. My Fair Value on this $77 stock is $95 and I will look to increase my position. |
One Year Chart |
 ESRX has delivered double-digit profit growth the last 4 qtrs, and Estimates for the next 4 qtrs are 10%, 19%, 19% and 10%. From reading research and headlines it seems Wall Street seems to be down on the stock. Not me, the numbers look great. I also like how the stock has been trending higher recently. The kicker is the P/E is only 12. Also, the company upped earnings estimates this qtr. |
Fair Value |
 I have held ESRX for more than a decade now. It used to be a 20% grower, then a 15% grower and now the estimated long-term growth rate is 11%. But profit growth is expected to average 15% the next 4 qtrs. My Fair Value P/E is 15, which is also the median P/E in three of the last four years. With a current P/E of 12 ESRX has significant upside. |
Bottom Line |
 Express Scripts has rose steady stock since its IPO in 1996. Although ESRX doesn’t pay a dividend, management buys back stock and that helps EPS. This is a conservative stock with an anticipated growth rate in the double digits. With the P/E currently being 12, there’s solid upside here. But there’s also risk that the company loses its biggest customer in Anthem. But I personally don’t think that will happen. ESRX ranks 30th of 38 stocks in the Growth Portfolio Power Rankings. It ranks 23rd of 37 stocks in the Conservative Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
30 of 38Aggressive Growth Portfolio N/AConservative Stock Portfolio 23 of 37 |
