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

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Molina Healthcare, Inc. (MOH - Free Report) has been gaining momentum for quite some time owing to restructuring measures and membership growth.

Over the past 60 days, the stock has witnessed its 2021 and 2022 earnings estimates move 0.6% and 0.9% north, respectively.

Its return on equity — a profitability measure — is 28.5%, better than the industry average of 19.4%. The metric reflects the presently Zacks Rank #3 (Hold) company’s effectiveness in utilizing its shareholders’ money. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Now let's dig deeper and see which factors make this leading health insurer an investor favorite.

The company is well-poised for growth on the back of its well-diversified portfolio of state contracts across all dimensions of the Medicaid product suite. It is also gaining traction from its operational efficiency.

The health insurance company continues to witness growth in its revenue base on the back of its membership growth and higher premium revenues. In the first half of the current year, its revenues climbed 45.3% year over year. Total revenues for 2021 are now anticipated to be above $26 billion compared with the prior outlook of more than $25 billion.

On the back of contract wins and strategic initiatives, its membership grew 21% and 32% year over year in 2020 and during the first half of 2021, respectively. Various buyouts, such as that of YourCare led to membership growth for the company.

Its inorganic growth story is also impressive. Molina Healthcare completed the buyout of Magellan Complete Care line of business of Magellan Health in 2020. The transaction will serve more than 3.6 million members under government-sponsored healthcare programs across 18 states. With this addition, the company is expected to build a better portfolio and gain an enhanced geographic diversity, etc.

In September 2020, Molina Healthcare inked a deal to buy substantially all the assets of Affinity Health Plan, Inc., which is expected to close in the fourth quarter of 2021. The company expects to complete the Cigna buyout in January 2022. All these initiatives bode well for the long haul.

Concurrent with its second-quarter 2021 results, Molina Healthcare raised its outlook for 2021. Adjusted EPS is now estimated to be at least $13.25 (compared with the prior guidance of at least $13 per share). Premium revenues are projected to be more than $25 billion (compared with more than $24 billion guided previously), which indicates growth of roughly 37% from the year-ago reported figure.

Total revenues for 2021 are forecast to be more than $26 billion (compared with above $25 billion expected earlier), which suggests growth of around 34% from the year-ago reported number. Membership of the company is projected to be 3.9 million, which implies a rise of 2.6% from the 2020 reported figure. In its Marketplace business, 590,000 members are expected by the end of 2021 (compared with the past forecast of roughly 500,000).

However, the health insurance provider is persistently witnessing a muted marketplace performance, which is a concern.

The company's earnings estimate stands at $13.42%, indicating an upside of 25.8% from the year-ago quarter's reported figure.

Its long-term growth rate stands at 17.7% higher than the industry's average of 13.9%.

Price Performance

Shares of this company have rallied 44% in a year’s time, outperforming its industry’s growth of 27.3%.
 

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Other companies in the same space, such as The Joint Corp. (JYNT - Free Report) , Centene Corporation (CNC - Free Report) and UnitedHealth Group Incorporated (UNH - Free Report) have also gained 490.1%, 1.2% and 32.3%, respectively, in the same time frame.