Amerigroup Corp. - Momentum

Amerigroup Corp. (AGP) recently jumped to a new multi-year high after reporting an awesome Q3 earnings surprise that more than doubled the Zacks Consensus Estimate. Estimates have since followed suit, giving this Zacks #1 rank stock a big does of upward momentum.

Company Description

Amerigroup Corp. operates as a managed healthcare company that specializes in serving people who receive healthcare benefits through public programs like Medicare and Medicaid. It was founded in 1994 and has a market cap of $2.3 billion.

Although these is plenty of uncertainty swirling around the healthcare sector right now on the back of recent legislation, that didn't stop AGP from stepping up an delivering awesome Q3 results on Oct 28 that easily beat expectations.

Third-Quarter Results

Revenue for the period was up a respectable 4% from last year to $1.5 billion. Earnings, however, looked amazing, coming in at $1.68, 107% ahead of the Zacks Consensus Estimate, where the company now has an average earnings surprise of 127% over the last four quarters.

The strong quarter was driven by growth in Amerigroup's premium revenue, which was up 15% from last year to $1.5 billion. The company also scored big on the expenses front, with its benefits expense falling to 80.5% of revenue from 87.5% last year.

Share Buy Backs

Amerigroup was also busy returning value to its shareholder during the quarter, buying back 1.9 million of its shares for $70.5 million.

The company's balance sheet looks good too, with cash and short-term investments up $98 million from last year to $741 million with just $243 million in debt.

Estimates

We saw some really big movement in estimates on the good quarter, with the current year adding 98 cents to $4.64, a 92% growth projection from last year.

Valuation

But in spite of the recent gains and bullish outlook, AGP still has value, trading with a forward P/E multiple of 9X, a discount to its peers 10X.

12-Month Chart

On the chart, AGP has been trending higher for most of the last 18 months, recently hitting a new multi-year high at $44.85 on the good quarter. The stochastic below the chart is signaling that shares are trading well away from over-bought territory, take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
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