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Here's Why You Should Add Molina Healthcare (MOH) Stock Now

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Molina Healthcare, Inc. (MOH - Free Report) has been gaining momentum for quite some time on the back of its restructuring measures and membership growth.

Over the past 60 days, the company has witnessed its 2021 earnings estimates move north by 1.2%.

Investors remain bullish regarding the stock’s prospects as it beat estimates in three of the trailing four quarters (while missing in one), the average surprise being 17.7%. This, in turn, highlights its operational excellence.

Now let’s delve deeper and analyse the factors that make this leading health insurer an investor favorite.

Its return on equity — a profitability measure — is 33.9%, better than the industry average of 22.9%. The metric reflects the Zacks Rank #2 (Buy) company’s effectiveness in utilizing its shareholders’ money.

The leading health insurance company has been witnessing healthy revenue stream on the back of its membership base. In first-quarter 2021, the metric surged 43.4% year over year, courtesy of increased membership in Medicaid and Marketplace. Total revenues for 2021 are anticipated to be more than $25 billion versus more than $24 billion guided previously.

Several contract wins add to its membership base. Membership of Molina Healthcare increased 21% and 35% year over year in 2020 and the first quarter of 2021, respectively. The upside can be attributed to well-performing Medicare, Medicaid and Marketplace businesses. Various buyouts, such as that of YourCare led to membership growth for the company.

Inorganic growth is a steady key growth trajectory for most health insurers. Last year, Molina Healthcare closed the buyout of Magellan Complete Care (MCC) line of business of Magellan Health, which serves more than 3.6 million members under government-sponsored healthcare programs across 18 states.

In April 2021, Molina Healthcare inked a deal to purchase Texas Medicaid and Medicare-Medicaid Plan (MMP) contracts and specific operating assets of Cigna for $60 million in cash.

Following stellar first-quarter results, this presently Zacks Rank #3 (Hold) company raised outlook for the current year with respect to certain metrics. Adjusted EPS is now estimated at least $13 (compared with the prior guidance of $12.50-$13 per share). Membership of the company is projected at 3.9 million, which indicates an improvement of 2.6% from the 2020 figure. In its Marketplace business, 500,000 members are expected by the end of 2021 (versus more than 400000 earlier).

However, the health insurance provider has been witnessing muted marketplace performance, which remains a concern.

Price Performance

Shares of this company have rallied 43.7% in a year’s time, outperforming its  industry’s growth of 38.3%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Other Stocks to Consider

Some other top-ranked stocks in the same space include Magellan Health, Inc. (MGLN - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and Select Medical Holdings Corporation (SEM - Free Report) . Magellan Health sports a Zacks Rank of 1 (Strong Buy), while UnitedHealth Group and Select Medical Holdings hold Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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