Unveiling Molina Healthcare's Value: Is It Priced Right? A Comprehensive Guide
With a daily gain of 2.71%, a three-month gain of 16.47%, and an Earnings Per Share (EPS) of 15.78, Molina Healthcare Inc (NYSE:MOH) is a stock that has caught the attention of many investors. But the question remains: is the stock fairly valued? In this article, we will delve into the valuation analysis of Molina Healthcare, providing a comprehensive look at the company's financial strength, profitability, and growth. We encourage you to read on for a deeper understanding of this healthcare giant.
A Snapshot of Molina Healthcare
Molina Healthcare Inc is a leading provider of healthcare plans, primarily focusing on Medicaid-related solutions for low-income families and individuals. The company operates a network of subsidiaries, each licensed as a health maintenance organization (HMO). Molina Healthcare's plans are funded by state government agencies on a per-member per-month basis. The company also offers Medicare Advantage plans and plans through health insurance exchanges. With a current stock price of $348.95 and a market cap of $20.30 billion, we will examine if Molina Healthcare's stock is fairly valued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. If the stock price significantly deviates from the GF Value Line, it can indicate whether the stock is overvalued or undervalued.
According to the GuruFocus Value calculation, Molina Healthcare's stock appears to be fairly valued. This implies that the long-term return of its stock is likely to be close to the rate of its business growth.
Assessing Molina Healthcare's Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss for investors. Therefore, it is crucial to review a company's financial strength before purchasing shares. Factors such as the cash-to-debt ratio and interest coverage can provide insights into a company's financial health. Molina Healthcare has a cash-to-debt ratio of 3.69, which ranks better than 68.42% of companies in the Healthcare Plans industry. The overall financial strength of Molina Healthcare is 8 out of 10, indicating strong financial health.
Profitability and Growth of Molina Healthcare
Companies that have consistently been profitable over the long term offer less risk for investors. Molina Healthcare has been profitable 9 out of the past 10 years. With a revenue of $32.60 billion and an Earnings Per Share (EPS) of $15.78, its operating margin is 4.74%, ranking better than 60% of companies in the Healthcare Plans industry.
Growth is a critical factor in the valuation of a company. Molina Healthcare's 3-year average revenue growth rate is better than 72.22% of companies in the Healthcare Plans industry. Its 3-year average EBITDA growth rate is 8.8%, ranking better than 64.71% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Over the past 12 months, Molina Healthcare's ROIC was 43.33 while its WACC was 8.6.
Conclusion
In conclusion, the stock of Molina Healthcare shows every sign of being fairly valued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 64.71% of companies in the Healthcare Plans industry. To learn more about Molina Healthcare's stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
