- The Washington Times - Monday, September 10, 2001

Health care will always be in demand, and Coventry Health Care Inc.'s stock price has never dipped below the $10 mark this year.

But some analysts have rated Coventry's stock as a "hold," believing Coventry's valuations are a little higher than other stocks in the health care industry.

Greg Crawford, an analyst with Kelton Fox-Pitt in New York, defines valuation as "what you have to pay to buy a sliver of the company's earnings stream."

According to Mr. Crawford, Coventry's valuation is at 15.9 times its current earnings, while Mid-Atlantic Medical Services (MAMSI), for example, is at 13.3 times its current earnings.

"It's just a better opportunity. If I'm going to invest in a company with a market capital of $1 million, I'm going to look at others first." He likened buying the stocks in the health care market to having the choice between buying a Subaru and a Mercedes-Benz.

"Some look at it as 'it's a higher-quality company,' and some say the valuation gap is too large, but with all other things being equal, I'm going to go for the cheaper price."

Joshua Raskin, an analyst with Lehman Brothers in New York, has rated the company a "buy." He also mentions that Coventry's stock is at a higher valuation rate, but he feels the company's accelerated economic growth makes up for the high valuation.

"This company is just growing the fastest in all companies I've covered," he says. Mr. Raskin expects the company to have an earnings growth rate of about 40 percent this year.

Coventry Health Care Inc. is a Bethesda managed health care company that operates a number of health plans under different names to its members located in the Midwest, Mid-Atlantic and Southeast United States.

Its 52-week high of $29.94 came on Dec. 27, while its 52-week low of $13 came on March 22. The stock closed at $20.70 on the New York Stock Exchange on Friday.

The company is also growing in size, acquiring Blue Ridge Health Alliance Inc. on Sept. 4. Blue Ridge Health serves the southwest and central parts of Virginia. Analysts are saying that company management has played a key role in Coventry's success, looking at failing health plans as "fixer-uppers."

"They buy distressed health plans at distressed prices. Other health plans have done that, but not to the extent of Coventry. It strengthens their current market."

Health care companies trading on the stock market have the advantage that their services will always be needed.

"What you're seeing is the benefits of strong health care premiums. It's part of the system," Mr. Crawford says. "You're seeing the defining characteristic of health care people will plan for health care expenses before capital expenses. That's a big plus."

But Coventry is doing better than its competition, which includes regional health care providers such as United Health Care in the Midwest, because of its strong earnings.

"The bottom line is that they keep delivering earnings," says David Shove, an analyst with Prudential Securities Research in New York. "In general, other companies have had a hard time doing that because of the slow economy."

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