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Are Investors Undervaluing Molina (MOH) Right Now?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company value investors might notice is Molina (MOH). MOH is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 9.43 right now. For comparison, its industry sports an average P/E of 12.93. MOH's Forward P/E has been as high as 21.78 and as low as 9.43, with a median of 13.22, all within the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. MOH has a P/S ratio of 0.39. This compares to its industry's average P/S of 0.44.

Finally, we should also recognize that MOH has a P/CF ratio of 8.10. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 11.65. MOH's P/CF has been as high as 67.49 and as low as 8.10, with a median of 10.62, all within the past year.

These are only a few of the key metrics included in Molina's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, MOH looks like an impressive value stock at the moment.


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