Helping businesses handle injured workers is paying off for Irvine’s CorVel Corp.
The company, which works with employers and insurers to keep workers’ compensation insurance costs in check, has been one of the better local stocks on Wall Street this year.
Since the start of 2009, CorVel’s shares are up more than 45% on a recent market value of about $395 million.
Growing profits are partly behind the surge.
For the three months through June, CorVel’s profit was up 15% to $6.4 million. Quarterly revenue rose 4% to $81.3 million.
The company is seeing a “return to normal” after last year’s financial and larger economic meltdown, which froze corporate decisions on spending for software and services such as CorVel’s.
“There’s renewed interest in products that better manage costs,” Chief Executive Daniel Starck said on a conference call with analysts last month.
CorVel sells software and services for managing workers’ compensation claims and reviewing medical bills. It employs about 750 nurses who manage the healthcare of injured workers, and it maintains a network of other healthcare service providers.
Customers include insurance companies, employers with healthcare plans and third-party administrators that handle claims for insurers or run health plans for employers.
Petco Animal Supplies Stores Inc., AMR Corp.’s American Airlines, UAL Corp.’s United Airlines and Coca-Cola Bottling Co. Consolidated are CorVel customers.
Strack said he prides himself on running the company conservatively—CorVel had no long-term debt and $20 million in cash on hand as of June 30.
“Conservative was really good in the fall of last year and the beginning of this year,” he said.
Stocks
CorVel flies below the radar on Wall Street. No analysts follow the company.
That’s because company directors control about 70% of CorVel’s shares, leaving just a small amount to be traded publicly.
CorVel has about 13 million outstanding shares that have seen average daily trading of about 34,000 shares for the past three months.
And the number of shares are shrinking. For the past decade, the company has been buying back stock, spending $186 million to retire 12.7 million shares.
“The company has a pretty specific strategy over its life—it’s to keep the equity base small,” Starck said.
That’s also a factor in CorVel’s run-up. With fewer shares to buy, an uptick in buying can have a dramatic effect on the stock.
Director Jeffrey Michael, a Minnesota investor who also heads Corstar Holdings Inc., is CorVel’s largest shareholder at about 60%.
V. Gordon Clemons, CorVel’s chairman, founder and former chief executive, owns about 1.3 million shares, or 10%.
HealthCor Management LP, a New York-based investment firm, owns about 8%.
CorVel’s latest push is its Enterprise Comp software, used to handle claims for workers injured on the job by suggesting early medical treatment and managing claims.
CorVel expanded Enterprise Comp after buying Hazelrigg Risk Management Services Inc. and Schaffer Cos. in 2007.
Enterprise Comp falls under CorVel’s patient management business, which made up 43% of its $310 million in revenue in the 12 months through March. CorVel’s network solutions business, which includes medical bill reviewing, made up the rest.
CorVel competes with more diversified companies that also offer workers’ compensation management software and services. They include Coventry Health Care Inc. of Bethesda, Md., Intracor, a unit of Philadelphia-based Cigna Corp., Wayne, Pa.-based Genex Services Inc., Sedgwick Claims Management Services Inc. of Memphis, Tenn., and Gallagher Bassett Services Inc. of Itasca, Ill.
CorVel has about 110 offices in 48 states and Puerto Rico. It has about 2,600 employees, including 140 in Orange County at its corporate office in Irvine and an office in Orange. n
