CorVel Corporation CRVL

Key data

The business

CorVel makes money two ways. Its Network Solutions arm reviews medical bills from workers' compensation claims, runs provider networks, and handles pharmacy services. Some bill-review arrangements pay CorVel based on performance. Its Patient Management arm is the third-party administrator: it runs the whole claim for a self-insured employer, from first report of injury through case management and return to work. Network Solutions carries the better economics; Patient Management is people-heavy and sticky. When a warehouse worker wrenches a back, CorVel's platform reprices the MRI bill, routes the case to a nurse, and pays the provider, all on one system the client would find painful to leave. The moat is thirty-plus years of claims data, an integrated software stack, and the switching cost of a book of open claims already running on it. Revenue reached $958.5 million last fiscal year. There are no borrowings, and the company pays no dividend.

The numbers

The story here is steady growth getting more profitable.

June's quarter, the first of fiscal 2027, was the strongest yet: revenue up 11% year over year and net income up 18%, on diluted EPS of $0.63 against $0.52. Note the December quarter, the softest of the five at $0.47, a reminder the line is not perfectly smooth. Consensus estimates are not in this run, so these are actual year-over-year moves, not beats.

Step back to the fiscal-year view and the compounding is clear. Revenue grew from $718.6 million in FY2023 to $958.5 million in FY2026, about 10% a year. Earnings per share grew faster, from $1.26 to $2.14, roughly 19% a year. The gap is the whole thesis: gross margin climbed from 22% in FY2023 to above 26% in the latest quarter as the mix tilted toward the bill-review side where each dollar drops further, and the share count shrank about 2% a year on buybacks. Operating cash flow reached $155.6 million last year against $45.4 million of capital spending, so the business throws off far more cash than it consumes.

That cash goes back out the door one way, through repurchases:

The variant here is that the mix keeps shifting toward the bill-review side, so profitability is not done climbing. Gross margin holding above 26% for two more quarters is the print that says the step-up is structural rather than one good quarter.

Management

Sarah Scott became chief executive and president on July 1 after 26 years at CorVel. Michael Combs, CEO for the prior 34 years, moved to executive chair. That makes succession the management question: Scott knows the machinery, but the next several quarters must show the margin and product momentum survived the handoff. The buyback is the only way cash comes back, and last year CorVel spent $56.2 million retiring stock at more than eight times book value. Insiders have been sellers, not buyers: eighteen sales over the past year and no purchases. The largest recent sale was Corstar Holdings, a greater-than-10% owner controlled by director Jeffrey Michael, selling $4.6 million on Sep 3 and 4. The Form 4 marks those transactions as made under a Rule 10b5-1 plan, so they are lower-signal scheduled sales, not a fresh discretionary exit. No dividend, light capital spending, $255.9 million of cash, and no borrowings round out a conservative capital story.

How it fails or surprises you

Claims volume tracks employment. CorVel's work exists because people get hurt on the job, and injury volume falls when hiring slows. The 10-Q flags a single customer as a receivables concentration, so one lost contract dents the administration side. If quarterly revenue growth slips from double digits toward 5%, the volume story is turning, and it turns before margins do.

December is the fact the read explains least. The thesis is smooth compounding, but the December quarter earned $0.47, down from $0.54 the quarter before and the weakest of the last five. If that was the real run-rate and June's $0.63 was catch-up rather than a new floor, growth is lumpier than a 30-times multiple assumes. The next two prints settle which reading is right.

Bill-review software escapes workers' comp (right tail). CorVel's engine for finding billing errors already works on workplace-injury claims. The company also sells payment-integrity services to health plans. New health-plan clients, explicit growth disclosure, or a separate revenue breakout would be the first evidence that this has become more than an option.

Closing thoughts

Most of what CorVel is worth today is already in the price. Thirty times earnings for a company growing profit near 18% is not cheap, and the multiple sits near the middle of its own history. The unproven option is health-plan payment integrity, and one number tells you whether the core quality is improving: gross margin. Hold above 26% and the profitability step-up looks structural. Slip back toward 24% and you are paying a premium for a slower grower. The cash-rich balance sheet removes financial fragility, but it does not protect the stock from multiple compression if growth wobbles.

The bet is still that companies keep paying CorVel to run and shrink the medical bills from workplace injuries, and that its bill-review software keeps spreading into regular health insurance. What breaks it is dull, not dramatic: revenue growth easing into mid-single digits while the multiple stays at 30 times. Watch two numbers together, quarterly revenue growth and net margin. As long as both keep climbing the compounding is intact. When revenue growth rolls over while margin stalls, the story you paid for is over, whatever the stock does that day.