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Here's Why You Should Retain Molina (MOH) in Your Portfolio
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Molina Healthcare, Inc.'s (MOH - Free Report) growing top line, accretive acquisitions, strong performing government business, contract wins and membership growth make it worth retaining in one’s portfolio. Also, its favorable growth estimates are confidence boosters for investors.
The company has a VGM Score of B.
Zacks Rank & Price Performance
MOH currently carries a Zacks Rank #3 (Hold). In the year-to-date period, the stock has lost 17.4% compared with the industry’s decline of 7.4%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for MOH’s 2023 earnings is pegged at $19.76, indicating a 10.3% increase from the year-ago reported figure of $17.92. The same for MOH’s 2023 revenues is pegged at $33.2 billion, indicating a 4% increase from the year-ago reported figure of $32 billion. The expected long-term earnings growth is pegged at 19.6%, outperforming the industry average of 15.3%.
Impressive Earnings Surprise History
MOH boasts an impressive surprise record. Its earnings outpaced estimates in each of the trailing four quarters, the average being 3%
Return on Equity
Return on equity, a measure reflecting how efficiently a company utilizes shareholders’ money, was 36% in the trailing 12 months, better than the industry average of 24.6%.
Growth Drivers
MOH has been witnessing growth in revenues over the past few years, banking on improved premiums. Molina, thus, estimates revenues for 2023 to increase 3.1% to $33 billion, whereas premium revenues are projected to grow 4% to $32 billion in 2023.
MOH envisions achieving 4% growth in premium revenues on the back of continued expansions, stronger membership growth and contract wins.
Another revenue source for Molina is investment income, as it invests the premium received to service claim demands in future. Given the rising interest rate environment, its investment income should continue to improve.
Molina’s inorganic growth trend is impressive as it does not move away from pursuing ambitious acquisitions to drive its growth. Strategic buyouts fuel premiums.
Along with inorganic growth initiatives, MOH won new state contracts in California, Iowa and Nebraska, highlighting unwavering focus on growing its business inorganically.
Prudent cost management efforts led to a 7.2% decline in its expenses in 2022. This figure is expected to fall further as the company holds its ground on the restructuring and profitability improvement plan it started in 2017.
A strong financial position is an additional tailwind for Molina. The health insurer has strong cash reserves to aid in repurchasing shares and paying off debts in the future. It repurchased shares worth $200 million in 2022. This should instill confidence in shareholders.
Key Concerns
There are a few factors that are impeding the stock’s growth lately.
MOH’s uncertain demand for Medicare and Medicaid products is worrisome. It also has a high medical care ratio, implying a smaller amount of premium left after paying insurance claims. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Amphastar Pharmaceuticals, Inc. (AMPH - Free Report) , BioRad Laboratories, Inc. (BIO - Free Report) and Catalyst Pharmaceuticals, Inc. (CPRX - Free Report) . Amphastar Pharmaceuticals and BioRad Laboratories currently sport a Zacks Rank #1 (Strong Buy), and Catalyst Pharmaceuticals carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Amphastar Pharmaceuticals’ 2023 earnings indicates 3.1% year-over-year growth. In the past year, AMPH’s stock has gained 5.2%. The Zacks Consensus Estimate for AMPH’s 2023 earnings has moved 12.8% north in the past 60 days.
The Zacks Consensus Estimate for BioRad Laboratories’ 2023 earnings indicates 10.3% year-over-year growth. The Zacks Consensus Estimate for BIO’s 2023 earnings has moved 5.9% north in the past 60 days.
The Zacks Consensus Estimate for Catalyst Pharmaceuticals’ 2023 earnings indicates 94.7% year-over-year growth. The Zacks Consensus Estimate for CPRX’s 2023 earnings has moved 2.8% north in the past seven days. In the past year, the CPRX stock has gained 103.1%.
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Here's Why You Should Retain Molina (MOH) in Your Portfolio
Molina Healthcare, Inc.'s (MOH - Free Report) growing top line, accretive acquisitions, strong performing government business, contract wins and membership growth make it worth retaining in one’s portfolio. Also, its favorable growth estimates are confidence boosters for investors.
The company has a VGM Score of B.
Zacks Rank & Price Performance
MOH currently carries a Zacks Rank #3 (Hold). In the year-to-date period, the stock has lost 17.4% compared with the industry’s decline of 7.4%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for MOH’s 2023 earnings is pegged at $19.76, indicating a 10.3% increase from the year-ago reported figure of $17.92. The same for MOH’s 2023 revenues is pegged at $33.2 billion, indicating a 4% increase from the year-ago reported figure of $32 billion. The expected long-term earnings growth is pegged at 19.6%, outperforming the industry average of 15.3%.
Impressive Earnings Surprise History
MOH boasts an impressive surprise record. Its earnings outpaced estimates in each of the trailing four quarters, the average being 3%
Return on Equity
Return on equity, a measure reflecting how efficiently a company utilizes shareholders’ money, was 36% in the trailing 12 months, better than the industry average of 24.6%.
Growth Drivers
MOH has been witnessing growth in revenues over the past few years, banking on improved premiums. Molina, thus, estimates revenues for 2023 to increase 3.1% to $33 billion, whereas premium revenues are projected to grow 4% to $32 billion in 2023.
MOH envisions achieving 4% growth in premium revenues on the back of continued expansions, stronger membership growth and contract wins.
Another revenue source for Molina is investment income, as it invests the premium received to service claim demands in future. Given the rising interest rate environment, its investment income should continue to improve.
Molina’s inorganic growth trend is impressive as it does not move away from pursuing ambitious acquisitions to drive its growth. Strategic buyouts fuel premiums.
Along with inorganic growth initiatives, MOH won new state contracts in California, Iowa and Nebraska, highlighting unwavering focus on growing its business inorganically.
Prudent cost management efforts led to a 7.2% decline in its expenses in 2022. This figure is expected to fall further as the company holds its ground on the restructuring and profitability improvement plan it started in 2017.
A strong financial position is an additional tailwind for Molina. The health insurer has strong cash reserves to aid in repurchasing shares and paying off debts in the future. It repurchased shares worth $200 million in 2022. This should instill confidence in shareholders.
Key Concerns
There are a few factors that are impeding the stock’s growth lately.
MOH’s uncertain demand for Medicare and Medicaid products is worrisome. It also has a high medical care ratio, implying a smaller amount of premium left after paying insurance claims. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Amphastar Pharmaceuticals, Inc. (AMPH - Free Report) , BioRad Laboratories, Inc. (BIO - Free Report) and Catalyst Pharmaceuticals, Inc. (CPRX - Free Report) . Amphastar Pharmaceuticals and BioRad Laboratories currently sport a Zacks Rank #1 (Strong Buy), and Catalyst Pharmaceuticals carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Amphastar Pharmaceuticals’ 2023 earnings indicates 3.1% year-over-year growth. In the past year, AMPH’s stock has gained 5.2%. The Zacks Consensus Estimate for AMPH’s 2023 earnings has moved 12.8% north in the past 60 days.
The Zacks Consensus Estimate for BioRad Laboratories’ 2023 earnings indicates 10.3% year-over-year growth. The Zacks Consensus Estimate for BIO’s 2023 earnings has moved 5.9% north in the past 60 days.
The Zacks Consensus Estimate for Catalyst Pharmaceuticals’ 2023 earnings indicates 94.7% year-over-year growth. The Zacks Consensus Estimate for CPRX’s 2023 earnings has moved 2.8% north in the past seven days. In the past year, the CPRX stock has gained 103.1%.