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Molina Healthcare (MOH) Up 86% in a Year: More Room to Run?

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Molina Healthcare, Inc. MOH has been benefiting from growing revenues driven by numerous buyouts and membership gains. A growing cash balance has also contributed to the stock’s rally.

Shares of the company have soared 86.1% in a year compared with the industry’s rally of 36%. The Zacks S&P 500 composite has risen 58.3% in the said time frame. With a market capitalization of $13.4 billion, the average volume of shares traded in the last three months was 0.3 million.

The healthcare provider has a decent earnings surprise history. It has beat estimates in two of the trailing four quarters and missed twice, the average surprise being 13.25%.

The company’s trailing 12-month return on equity (ROE) of 32.2% remains higher than the industry’s ROE of 21.7%. This highlights tactical efficiency in utilizing shareholder’s funds.

Will the Bull Run Continue?

This Zacks Rank #3 (Hold) company boasts of a well-established presence in the Medicare, Medicaid and Marketplace business through several contract wins and membership gains. With an U.S. population aged 65 years or above likely to account for 22% of the total population by 2050 (up from 16.5% in 2019) per Statista Research Department, the company’s Medicare business holds significant prospects. Also, its Medicaid health plans offering coverage to low-income groups seem to be the need of the hour as the entire United States is grappling with the COVID-19 pandemic induced financial woes.

Time and again, Molina Healthcare has proved itself to be a cost-effective healthcare provider catering to diverse needs of the community it serves. Numerous buyouts have not only helped the company to devise enhanced health plans and expand its foothold across several states but have also been providing a boost to the company’s revenues in 2020. In total, Molina Healthcare unveiled health plan acquisitions, which fetched annualized aggregate premium revenues of more than $6 billion during last year.

Case in point, a 21% rise in membership coupled with YourCare and Passport buyouts have resulted in 15% revenue growth during 2020. In 2021, the company expects growth of more than 23.7% in revenues from the 2020 figure. Notably, the Zacks Consensus Estimate for the same suggests year-over-year growth of 27.2% from the 2020 reported figure.

Moreover, the solvency position of this healthcare provider looks strong. Its cash balance for 2020 has nearly doubled from the 2019-end level. Based on solid cash generation abilities, it has been committed to enhancing shareholder value through share buybacks. Notably, the company’s net cash provided by operating activities increased more than fourfold during 2020 from 2019-end.

The Zacks Consensus Estimate for the company’s 2021 earnings per share indicates year-over-year improvement of 21.3% from the 2020 reported figure.

Stocks to Consider

Some better-ranked stocks in the medical space include Select Medical Holdings Corporation SEM, Tenet Healthcare Corporation THC and HCA Healthcare, Inc. HCA. While Select Medical sports a Zacks Rank #1 (Strong Buy), Tenet Healthcare and HCA Healthcare carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Select Medical, Tenet Healthcare and HCA Healthcare have a trailing four-quarter earnings surprise of 242.41%, 199.09% and 58.50%, on average, respectively.

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Molina Healthcare, Inc (MOH) : Free Stock Analysis Report

Tenet Healthcare Corporation (THC) : Free Stock Analysis Report

HCA Healthcare, Inc. (HCA) : Free Stock Analysis Report

Select Medical Holdings Corporation (SEM) : Free Stock Analysis Report

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