AMERIGROUP Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Medicaid coverage provider AMERIGROUP (NYS: AGP) sank as low as 25% on Friday after its quarterly results disappointed Wall Street.

So what: Hurt by a one-time charge associated with a premium adjustment in Georgia, AMERIGROUP posted a second-quarter profit of $0.83 per share, down from $1.31 per share in the year-ago period. The shares have been on a tear in recent months, up 50% in 2011, alone, so it's no surprise that the earnings drop is triggering AMERIGROUP's biggest share price sell-off in about almost years.

Now what: I wouldn't be so quick to pounce on this sell-off. The Georgia issue has raised a cloud of uncertainty over the space, with Medicaid-dependent insurers WellCare (NYS: WCG) and Centene (NYS: CNC) also experiencing big losses today. Add the fact that higher-than-expected operating costs and a health-benefits ratio also led AMERIGROUP to miss estimates on an adjusted basis, and it's an easy decision to stay away.

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At the time thisarticle was published Fool contributorBrian Pacamparaowns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool'sdisclosure policyalways gets a perfect score.

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