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Why Should You Add Magellan Health to Your Portfolio?
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Magellan Health, Inc. is well-placed for growth on the back of inorganic growth strategies and operating excellence.
This Zacks Rank #1 (Strong Buy) company’s growth trajectory is also apparent from its impressive Value Score of A. Our research shows that stocks with a Value Style Score of A or B when combined with a top Zacks Rank of 1 or 2 offer the best opportunities in the value investing space.
Having shed nearly 32% of value in a year’s time compared with its industry’s decline of 2.1%, the current price levels provide an attractive entry point to own the stock.
Its return on tangible equity — a profitability measure — stands at 89.3% versus its industry’s negative average of 120.8%.
The company has constantly made efforts to enhance its capabilities through a series of acquisitions. In Healthcare segment, a number of buyouts from 2013 to 2016 expanded its Magellan Complete Care (MCC) reporting unit. The acquisition of Armed Forces Services Corporation (“AFSC”) in 2016, also helped the company boost its existence in the federal marketplace. All these inorganic growth initiatives are expected to augur well for the company’s long-term growth.
The company has also been making efforts to rein in costs and to this end, already made headcount reduction during the fourth quarter of 2018. It is also seeking additional opportunities for a more industry competitive administrative cost structure in 2020 and beyond. These measures are projected to lead to a cost improvement of $30-$40 million in the next two to three years. We believe, these endeavors will aid margins going forward.
Moreover, its debt to equity ratio declined in 2018, thereby strengthening the balance sheet. Its current debt to equity ratio of 57.8% is lower than the industry average of 63.2%, which reduces financial risk.
The company’s long-term growth rate came in at 23.8%, higher than the industry's 14% average, which is steadily positive for the company.
The Zacks Consensus Estimate for current-year earnings per share is pegged at $3.92, suggesting a surge of 59.4% on revenues of $7.14 billion from the year-ago reported figures.
For 2020, the Zacks Consensus Estimate for earnings per share stands at $4.96 on $7.32 billion revenues, implying a respective 26.6% and 2.5% rise from the prior-year reported numbers.
WellCare Health offers managed care services to government-sponsored health care programs. The company pulled off average positive surprise of 13.52% in the preceding four quarters. It holds a Zacks Rank #2 (Buy).
HCA Healthcare provides health care services. In the last four quarters, the company delivered average beat of 15.74%. It carries a Zacks Rank of 2.
Molina Healthcare is a multi-state healthcare organization. In the trailing four quarters, the company came up with average beat of 88.17%. It sports a Zacks Rank #1 (Strong Buy).
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Why Should You Add Magellan Health to Your Portfolio?
Magellan Health, Inc. is well-placed for growth on the back of inorganic growth strategies and operating excellence.
This Zacks Rank #1 (Strong Buy) company’s growth trajectory is also apparent from its impressive Value Score of A. Our research shows that stocks with a Value Style Score of A or B when combined with a top Zacks Rank of 1 or 2 offer the best opportunities in the value investing space.
Having shed nearly 32% of value in a year’s time compared with its industry’s decline of 2.1%, the current price levels provide an attractive entry point to own the stock.
Its return on tangible equity — a profitability measure — stands at 89.3% versus its industry’s negative average of 120.8%.
The company has constantly made efforts to enhance its capabilities through a series of acquisitions. In Healthcare segment, a number of buyouts from 2013 to 2016 expanded its Magellan Complete Care (MCC) reporting unit. The acquisition of Armed Forces Services Corporation (“AFSC”) in 2016, also helped the company boost its existence in the federal marketplace. All these inorganic growth initiatives are expected to augur well for the company’s long-term growth.
The company has also been making efforts to rein in costs and to this end, already made headcount reduction during the fourth quarter of 2018. It is also seeking additional opportunities for a more industry competitive administrative cost structure in 2020 and beyond. These measures are projected to lead to a cost improvement of $30-$40 million in the next two to three years. We believe, these endeavors will aid margins going forward.
Moreover, its debt to equity ratio declined in 2018, thereby strengthening the balance sheet. Its current debt to equity ratio of 57.8% is lower than the industry average of 63.2%, which reduces financial risk.
The company’s long-term growth rate came in at 23.8%, higher than the industry's 14% average, which is steadily positive for the company.
The Zacks Consensus Estimate for current-year earnings per share is pegged at $3.92, suggesting a surge of 59.4% on revenues of $7.14 billion from the year-ago reported figures.
For 2020, the Zacks Consensus Estimate for earnings per share stands at $4.96 on $7.32 billion revenues, implying a respective 26.6% and 2.5% rise from the prior-year reported numbers.
Other Key Picks
Investors interested in the medical sector can also take a look at some other top-ranked stocks like WellCare Health Plans, Inc. , HCA Healthcare, Inc. (HCA - Free Report) and Molina Healthcare, Inc (MOH - Free Report) . You can see the complete list of today’s Zacks #1 Rank stocks here.
WellCare Health offers managed care services to government-sponsored health care programs. The company pulled off average positive surprise of 13.52% in the preceding four quarters. It holds a Zacks Rank #2 (Buy).
HCA Healthcare provides health care services. In the last four quarters, the company delivered average beat of 15.74%. It carries a Zacks Rank of 2.
Molina Healthcare is a multi-state healthcare organization. In the trailing four quarters, the company came up with average beat of 88.17%. It sports a Zacks Rank #1 (Strong Buy).
Will you retire a millionaire?
One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”
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