Molina Healthcare Inc (MOH, Financial) experienced a daily gain of 3.29% and a three-month gain of 14.92% with an Earnings Per Share (EPS) of 16.04. The question we aim to answer is whether the stock is fairly valued at its current market price. The valuation analysis that follows provides an in-depth examination of the intrinsic value of Molina Healthcare (MOH).
A Snapshot of Molina Healthcare Inc (MOH, Financial)
Molina Healthcare Inc offers healthcare plans focused on Medicaid-related solutions for low-income families and individuals. Its health plans are operated by a network of subsidiaries, each licensed as a health maintenance organization (HMO). In addition to its Health Plans segment, Molina has a Medicaid, Medicare, and Marketplace segment that represents the government-funded or sponsored programs under their management information systems. Molina's Medicaid plans receive revenue on a per-member per-month basis from state government agencies. Its Medicare Advantage plans receive revenue from managed care plans that contract with the Centers for Medicaid and Medicare (CMS). Molina also provides plans through health insurance exchanges.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
We believe the GF Value Line is the fair value that the stock should be traded at. The stock price will most likely fluctuate around the GF Value Line. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
At its current price of $348.53 per share, Molina Healthcare has a market cap of $20.30 billion and the stock gives every indication of being fairly valued. Because Molina Healthcare is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength of Molina Healthcare
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Molina Healthcare has a cash-to-debt ratio of 4.07, which is better than 73.68% of 19 companies in the Healthcare Plans industry. The overall financial strength of Molina Healthcare is 7 out of 10, which indicates that the financial strength of Molina Healthcare is fair.
Profitability and Growth of Molina Healthcare
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Molina Healthcare has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $33.20 billion and Earnings Per Share (EPS) of $16.04. Its operating margin is 4.72%, which ranks better than 60% of 15 companies in the Healthcare Plans industry. Overall, GuruFocus ranks the profitability of Molina Healthcare at 8 out of 10, which indicates strong profitability.
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Molina Healthcare is 27.8%, which ranks better than 72.22% of 18 companies in the Healthcare Plans industry. The 3-year average EBITDA growth rate is 8.8%, which ranks better than 64.71% of 17 companies in the Healthcare Plans industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Molina Healthcare's ROIC was 41.23, while its WACC came in at 8.25.
Conclusion
In conclusion, the stock of Molina Healthcare (MOH, Financial) gives every indication of being fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 64.71% of 17 companies in the Healthcare Plans industry. To learn more about Molina Healthcare 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.
