Factors That Make Molina Healthcare (MOH) an Attractive Bet Now
Molina Healthcare, Inc. MOH gains from improved premium revenues, growth in Medicaid and Medicare membership as well as a commendable financial position. A favorable earnings per share (EPS) outlook for 2023 reinforces investors’ confidence in the stock.
Top Zacks Rank & Upbeat Price Performance
Molina Healthcare currently carries a Zacks Rank #2 (Buy).
The stock has gained 11.6% in the past six months against the industry’s 0.4% decline. The Zacks Medical sector inched up 0.6% and the S&P 500 composite has risen 14.2% in the same time frame.
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Favorable Style Score
MOH carries an impressive Value Score of A. Value Score helps find stocks that are undervalued. Back-tested results have shown that stocks with a favorable Value Score in combination with a solid Zacks Rank are the best investment bets.
Robust Prospects
The Zacks Consensus Estimate for Molina Healthcare’s 2023 earnings is pegged at $20.66 per share, indicating growth of 15.3% from the prior-year reported figure. The consensus mark for revenues stands at $33.1 billion, implying a rise of 3.4% from the year-ago reported number.
The consensus mark for 2024 earnings is pegged at $23.44 per share, suggesting an improvement of 13.5% from the 2023 estimate. The same for revenues stands at $38.2 billion, hinting at a 15.7% increase from the 2023 estimate.
Impressive Earnings Surprise History
MOH’s bottom line outpaced estimates in each of the trailing four quarters, the average surprise being 7.18%.
Solid Return on Equity
The return on equity for Molina Healthcare is currently 35.9%, which is higher than the industry’s average of 24.7%. The figure substantiates the company’s efficiency in utilizing shareholders’ funds.
Valuation: Cheaply Priced
Price-to-earnings (P/E) is one of the multiples used for valuing healthcare stocks. MOH has a reading of 13.75 compared with the health maintenance organization industry’s forward 12-month P/E ratio of 16.34. It is quite evident that the stock is currently undervalued.
A Strong EPS View for 2023
Management forecasts adjusted EPS to be a minimum of $20.75, which suggests 16% growth from the 2022 figure.
Key Business Tailwinds
Revenues of Molina Healthcare continue to benefit on the back of an expanding customer base, which it earns through distributing cost-effective Medicaid and Medicare plans across different U.S. communities. The strength of such plans often fetches contract wins from time to time, which is another means to boost membership growth.
One of the recent contract wins of Molina Healthcare this August was receiving a Medicaid managed care contract from the New Mexico Human Services Department. Needless to say, such contract wins, which result in membership growth, fetch improved premiums, which remains the most significant contributor to a health insurer’s top line.
An aging U.S. population belonging to the medically vulnerable group is likely to sustain the solid demand for MOH’s Medicare plans, which is primarily meant to cater to individuals aged 65 years or above. Also, premium revenues improved 3.9% year over year in the first half of 2023, attributable to higher Medicaid and Medicare membership.
A series of acquisitions undertaken over the years have expanded the capabilities, diversified revenue streams and solidified the geographical footprint of Molina Healthcare. Molina Healthcare announced plans to buy Brand New Day and Central Health Plan of California in June 2023 in a bid to bolster its Medicare presence across California and enhance its position in the evolving home health market.
The health insurer also resorts to tactical cost-cutting measures, which aid margins. A strong financial standing is of dire need to pursue business investments and that’s exactly the case with MOH. Growing cash reserves and solid cash-generating abilities bear testament to the same. It generated operating cash flows of $1.4 billion in the first half of 2023, which surged 91.9% year over year.
Other Stocks to Consider
Some other top-ranked stocks in the Medical space are Option Care Health, Inc. OPCH, Encompass Health Corporation EHC and Penumbra, Inc. PEN, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Option Care Health’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters and matched the mark once, the average beat being 57.02%. The consensus estimate for OPCH’s 2023 earnings suggests 71.1% surge, while the same for revenues indicates growth of 8.4% from the respective year-ago reported figures.
The consensus estimate for OPCH’s 2023 earnings has moved 51.1% north in the past 60 days. Shares of Option Care Health have gained 8.6% in the past six months.
Encompass Health’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, the average surprise being 14.04%. The consensus estimate for EHC’s 2023 earnings indicates a rise of 19% from the year-ago reported figure.
The consensus estimate for EHC’s 2023 earnings has moved 6.3% north in the past 30 days. Shares of Encompass Health have gained 28% in the past six months.
Penumbra’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 94.24%. The consensus estimate for PEN’s 2023 earnings is pegged at $1.75 share, which indicates a nearly 11-fold increase from the prior-year reported figure. The same for revenues indicates growth of 25.2% from the year-ago reported figure.
The Zacks Consensus Estimate for PEN’s 2023 earnings has moved 7.4% north in the past 30 days. Shares of Penumbra have inched up 1.4% in the past six months.
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Molina Healthcare, Inc (MOH) : Free Stock Analysis Report
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