Molina Healthcare, Inc. MOH has been in investors’ good books, riding on a healthy revenue stream and restructuring initiatives.
Its VGM Score of A is also impressive. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
The company saw consistent growth in its revenue base in the past several years. Although the top line declined in 2018 and 2019, it again bounced back in the March quarter. Management expects total revenues to grow to $3 billion within a couple of years.
Molina Healthcare has been growing on the back of its Medicaid business. Last month, management informed that its Kentucky health plan subsidiary was awarded a new Medicaid managed care contract. This new agreement is likely to benefit enrollees of the company’s Medicaid programs in Kentucky. The leading industry player constantly undertook efforts to expand its presence in the Medicaid market. In line with such initiatives, this healthcare provider inked a deal worth $820 million this April to acquire Magellan Complete Care (MCC), which is yet another managed care organization.
Further, the entire United States is grappling with financial woes due to the rampant COVID-19 pandemic. At a time when unemployment levels are alarmingly high, its Medicaid business is likely to witness increased membership.
The company has been gaining from the restructuring and profitability improvement plan started in 2017. The scheme included streamlining of organizational structure to improve efficiency as well as the speed and quality of decision-making. We expect this initiative to help curb costs going forward. As part of this initiative, the company sold its units, namely Pathways Health and Community Support, LLC and Molina Medicaid Solutions, which will likely allow it to concentrate on core growth areas.
Amid the COVID-19 pandemic, the company reaffirmed its initial outlook. Total revenues are expected to be $18.3 billion, suggesting an 8.7% increase from the year-ago reported number. The company anticipates earnings in the range of $11.20-$11.70 per share.
This company has been deploying capital prudently to enhance shareholder value on the back of its balance-sheet strength. It completed its $500-million share repurchase program. Its impressive capital position, which assists in efficient capital management, will attract investors’ attention. Moreover, as of Mar 31, 2020, the company had cash and cash equivalents worth $2.3 billion, higher than its long-term debt of $1.5 billion. Its times interest earned stands at 12.4X, higher than the industry average of 10.3X. Thus, its solvency level is encouraging.
Its earnings estimate for 2020 stands at $11.91, suggesting an upside of 2.9% from the prior-year reported figure.
Shares of this currently Zacks Rank #2 (Buy) company have surged 31.3% in a year’s time, outperforming its industry’s growth of 7.8%.
Other companies in the same space, such as UnitedHealth Group Incorporated UNH, Centene Corporation CNC and Humana Inc. HUM have also gained 19%, 21.5% and 41%, respectively, in the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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