Molina Healthcare Stock To $209?

Molina Healthcare (MOH) stock has fallen 17% during the past day, and is currently trading at $161.00. Our machine-driven multi-factor assessment suggests that it may be time to buy more shares of MOH stock. We have, overall, a positive view of the stock, and a price of $209 may not be out of reach. We believe there are only a couple of things to fear in MOH stock given its overall Strong operating performance and financial condition. Taken together with its Low valuation, this makes the stock look Attractive.

Below is our assessment:

MOH stock has fallen meaningfully recently and we currently find it attractive. While this may feel like an opportunity, there is significant risk in relying on a single stock. On the other hand, there is a huge value to a broader diversified approach we take with Trefis High Quality Portfolio. Trefis works with Empirical Asset Management – a Boston area wealth manager – whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Let’s get into details of each of the assessed factors but before that, for quick background: With $8.6 Bil in market cap, Molina Healthcare provides managed healthcare services to low-income families and individuals under Medicaid, Medicare, and government programs across 18 states, serving over 5 million members.

[1] Valuation Looks Low

This table highlights how MOH is valued vs broader market. For more details see: MOH Valuation Ratios

[2] Growth Is Strong

• Molina Healthcare has seen its top line grow at an average rate of 12.8% over the last 3 years
• Its revenues have grown 16% from $37 Bil to $43 Bil in the last 12 months
• Also, its quarterly revenues grew 15.7% to $11 Bil in the most recent quarter from $9.9 Bil a year ago.

This table highlights how MOH is growing vs broader market. For more details see: MOH Revenue Comparison

[3] Profitability Appears Very Weak

• MOH last 12 month operating income was $1.7 Bil representing operating margin of 3.8%
• With cash flow margin of 1.2%, it generated nearly $537 Mil in operating cash flow over this period
• For the same period, MOH generated nearly $1.1 Bil in net income, suggesting net margin of about 2.6%

This table highlights how MOH profitability vs broader market. For more details see: MOH Operating Income Comparison

[4] Financial Stability Looks Very Strong

• MOH Debt was $3.6 Bil at the end of the most recent quarter, while its current Market Cap is $8.6 Bil. This implies Debt-to-Equity Ratio of 41.3%
• MOH Cash (including cash equivalents) makes up $8.8 Bil of $16 Bil in total Assets. This yields a Cash-to-Assets Ratio of 54.3%

[5] Downturn Resilience Is Strong

MOH has been more resilient than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• MOH stock fell 29.4% from a high of $369.23 on 26 October 2022 to $260.64 on 15 March 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 12 December 2023
• Since then, the stock increased to a high of $419.53 on 19 March 2024 , and currently trades at $161.00

 
2020 Covid Pandemic

• MOH stock fell 29.9% from a high of $153.84 on 19 February 2020 to $107.79 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 8 April 2020

 
2008 Global Financial Crisis

• MOH stock fell 59.0% from a high of $27.22 on 24 December 2007 to $11.17 on 12 December 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 4 April 2011

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read MOH Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.