The stock of Molina Healthcare Inc (MOH, Financial) recently experienced a daily loss of 3.3%, yet it has gained 14.04% over the past three months. With an Earnings Per Share (EPS) of 16.04, investors are keen to understand: Is Molina Healthcare (MOH) fairly valued? The following analysis seeks to shed light on this question, offering an in-depth look at the company's valuation in the current market.
Company Overview
Molina Healthcare Inc offers specialized healthcare plans, primarily catering to low-income families and individuals through a network of HMO-licensed subsidiaries. With a market cap of $20.60 billion and sales reaching $33.20 billion, the company's role in Medicaid, Medicare, and Marketplace segments is significant. Comparing Molina Healthcare's current stock price of $353.31 with the GuruFocus Fair Value (GF Value) of $373.94 suggests that the stock might be trading at a fair valuation.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. If a stock trades significantly above this line, it may be overvalued, suggesting a potentially poor future return. Conversely, a stock priced below the GF Value line might offer a more promising return. Currently, Molina Healthcare (MOH, Financial) is assessed as fairly valued, implying that its long-term return could align closely with the company's growth rate.
Financial Strength
Investors must consider a company's financial strength to avoid the risk of permanent capital loss. Molina Healthcare's cash-to-debt ratio of 4.07, which ranks in the top 73.68% of its industry, indicates a commendable level of financial robustness. The overall financial strength of Molina Healthcare is rated as fair, with a score of 7 out of 10.
Profitability and Growth
Consistent profitability is a hallmark of a less risky investment. Molina Healthcare has maintained profitability for 9 out of the past 10 years, with an operating margin of 4.72%, ranking well within its industry. The company's strong profitability is reflected in its rank of 8 out of 10.
Company growth is a vital component of valuation, and Molina Healthcare's average annual revenue growth of 27.8% positions it favorably within the Healthcare Plans industry. The 3-year average EBITDA growth rate of 8.8% further underscores the company's robust growth prospects.
ROIC vs. WACC
An effective way to evaluate profitability is by comparing the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC). Molina Healthcare boasts a ROIC of 41.23, significantly surpassing its WACC of 8.18, indicating efficient cash flow generation in relation to the capital invested.
Conclusion
In conclusion, Molina Healthcare (MOH, Financial) appears to be fairly valued considering its current financial condition and strong profitability. The company's growth outperforms a significant portion of its industry peers. For a detailed exploration of Molina Healthcare's financials, interested investors can view the company's 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.
