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Should Value Investors Buy Molina (MOH) Stock?

Zacks Equity Research
Reliance Steel (RS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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 use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One stock to keep an eye on is Molina (MOH). MOH is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock holds a P/E ratio of 13.80, while its industry has an average P/E of 15.39. Over the past 52 weeks, MOH's Forward P/E has been as high as 26.16 and as low as 11.52, with a median of 19.49.

Investors should also note that MOH holds a PEG ratio of 1.10. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. MOH's PEG compares to its industry's average PEG of 1.15. Over the past 52 weeks, MOH's PEG has been as high as 1.71 and as low as 0.81, with a median of 1.32.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. 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 0.44. This compares to its industry's average P/S of 0.47.

Finally, our model also underscores that MOH has a P/CF ratio of 10.53. 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 company's current P/CF looks solid when compared to its industry's average P/CF of 14.15. Within the past 12 months, MOH's P/CF has been as high as 67.91 and as low as -23.30, with a median of 10.78.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Molina is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, MOH feels like a great value stock at the moment.


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