Aetna Inc. (NYSE: AET) may be worth quite a bit more than its current price, and that might be the case with or without its merger with Humana Inc. (NYSE: HUM). That is the view of the Argus, a truly independent research firm with no conflicts of interest in the companies it covers.

Monday’s upgrades and downgrades included a reaffirmed Buy rating from Argus, with a $130 price target. The firm noted that Aetna is negotiating with the Department of Justice (DOJ) to receive antitrust approval for the Humana acquisition. It is still said to be expecting to complete the merger in the second half of 2016.

Argus noted that Aetna had strong second quarter earnings results which beat expectations. With earnings season about to kick off, Argus has now raised its operating earnings per share estimates to $7.50 from $7.35 for 2015 and raised its original $8.15 estimate by a dime per share to $8.25 for 2016. They also said that Aetna’s valuation appear favorably valued at 13.2-times the 2016 EPS estimate, which is below the average multiple of 15.1 for the Argus coverage universe of managed care stocks.

The report from Monday said:

We have a positive view of the growth opportunities offered by the Humana acquisition. In addition to its large Medicare Advantage business, Humana will bring to Aetna a pharmacy benefit manager that will allow it to in-source the management of prescription drug plans… Privately, the company is meeting with the U.S. Department of Justice as the agency reviews the potential antitrust implications of the merger. Management has emphasized that there is little geographical overlap between the two companies’ commercial and Medicare Advantage businesses. At the same time, in projecting earnings accretion and cost synergies from the deal, Aetna has assumed that it will need to make a number of divestitures.

Aetna has also brought in former UnitedHealth executive Rick Jelinek to oversee the integration of these two companies. While total revenue grew 5% to $15.24 billion, the consolidated medical loss ratio was down 200 basis points to 81.1%. The operating margin in the healthcare segment was 4.9%, up 70 basis points from the prior year.

Argus did warn that Aetna has historically traded at a discount to peers, due to its relatively larger exposure to the commercial market and smaller exposure to Medicare and Medicaid. Both have stronger growth prospects than the commercial market. Argus concluded:

Since the 2013 acquisition of Coventry, Aetna has a more balanced portfolio with a greater presence in the government market. In addition, with the Humana acquisition, Aetna will be able to generate a larger proportion of revenue and EPS from the government businesses. As such, we believe that this discount is no longer warranted.

Aetna shares were up 1.3% at $110.63 on Monday’s close, with a consensus analyst price target of $142.67 and with a 52-week range of $71.81 to $134.40.

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