News that a group of prominent attorneys planned to go after the HMO industry with class-action lawsuits caused shares of Wellpoint Health Networks Inc. to plummet at the end of September. In the course of a couple of days, the Thousand Oaks company’s stock hit a 52-week low of $48.25, off 49 percent from its high of $97 in mid-June. The sell-off left executives of the Thousand Oaks managed care company a bit perplexed. The HMO business, the target of the class-action lawyers, represents only 25 percent of Wellpoint’s business. Meanwhile, the company has continued to deliver strong earnings growth to shareholders. “It was very disappointing,” recalls Leonard D. Schaeffer, chairman and chief executive. “The fundamentals of the company never changed. We’ve committed to delivering 15 percent compounded earnings growth, and we have.” If Wellpoint was looking for proof the sell-off was an overreaction, officials didn’t have to wait long. The company’s stock has powered its way back to around $68 a share, a 41 percent increase from its low ebb, and analysts appear bullish about its long-term prospects. Kenneth Abramowitz, an analyst with Sanford C. Bernstein & Co. in New York, said Wellpoint would be a good play for investors looking for a company with consistent earnings growth over a long-term horizon. The company has managed to provide 15 percent annual earnings growth at a time when the managed care industry has been in an all-out price war, he said. “Wellpoint really stands out of the group,” said Abramowitz, who has a “buy” rating on the stock. “They will tell you what they’re going to do and they do it. You have to give them an A for focus.” Wellpoint reported net income of $76.2 million ($1.11 per diluted share) for the third quarter ended Sept. 30, compared to $66.7 million (95 cents per diluted share) for the like period a year earlier. Revenue was $1.74 billion vs. $1.5 billion. Joseph D. France, an analyst with Credit Suisse First Boston, said the company appears on track to meet his fourth-quarter earnings estimate of $1.12 a share when it reports its results on Feb. 14. “We like Wellpoint very much,” said France, who also rates the stock a “buy.” “They have a broad product line predisposition.” In terms of members, Wellpoint is the fourth largest managed care firm in the United States, serving about 5 million members through Blue Cross of California in its home state and 2.1 million members through its Unicare national brand. The company sells preferred provider organization (PPO), point of service (POS) and health maintenance organization (HMO) products. Wellpoint serves another 30.6 million clients with specialty care products, such as pharmacy, vision, dental and mental health plans as well as health, life and disability insurance. France believes the stock sell-off in late September was an overreaction to news that Richard Scruggs, a Pascagoula, Miss. attorney who waged a class-action war against the tobacco industry, was taking aim at HMOs. So far, several large HMO providers have been named in lawsuits, but Wellpoint has managed to escape legal challenge. France believes the company is not as vulnerable as other providers because its PPOs give customers greater freedom of choice. Poor service and a lack of choice are expected to be key themes in the class-action lawsuits. Meanwhile, Wellpoint continues to add to its girth through an aggressive acquisition strategy. In July, the company agreed to acquire Cerulean Cos., the parent of Blue Cross and Blue Shield of Georgia, in a stock swap valued at about $500 million. Then, the company announced in December an agreement to acquire Rush Prudential Health Plans of Chicago in a deal valued at approximately $200 million. Schaeffer said the acquisitions are in keeping with the company’s strategy of expanding in six key areas: California, Texas, Georgia, northern Virginia, the Midwest and New York. “I think we have an excellent future due to the demographics of the U.S. As baby boomers age, there is an increased need and use for health care services,” Schaeffer said. “You’re going to see it grow dramatically, and we expect to grow with that.”