As investors scrutinize daily market fluctuations, Molina Healthcare Inc (MOH, Financial) has recently experienced a 2.88% drop in stock price. However, looking at a broader time frame, the company has gained 8.86% over the past three months. A critical factor in evaluating a company like Molina Healthcare is its Earnings Per Share (EPS) (EPS), which currently stands at 16.04. This figure raises an important question: Is Molina Healthcare fairly valued at its current market price? This article delves into a comprehensive valuation analysis to provide an answer.
Understanding the financial health and potential growth prospects of Molina Healthcare is crucial for investors. As a leading healthcare provider, Molina Healthcare offers Medicaid-related solutions for low-income families and individuals. With a current stock price of $350.82 and a GF Value of $373.96, it's essential to compare these figures to determine if the stock is trading at a fair valuation. This comparison will serve as the foundation for an in-depth analysis of Molina Healthcare's intrinsic value.
Understanding the GF Value of Molina Healthcare
The GF Value is a unique metric that reflects the intrinsic value of a stock, based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides investors with an idea of what a fair trading value for the stock should be. If Molina Healthcare's stock price is significantly higher than the GF Value Line, it may suggest an overvaluation, potentially leading to poor future returns. Conversely, if the stock price is well below the GF Value Line, it could indicate undervaluation and the potential for higher future returns.
At present, Molina Healthcare's market capitalization is $20.40 billion, and the stock seems to be fairly valued according to the GF Value. This fair valuation suggests that the long-term return of Molina Healthcare's stock is likely to be in line with the company's business growth rate.
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Financial Strength of Molina Healthcare
Investing in companies with robust financial strength can mitigate the risk of capital loss. Molina Healthcare's cash-to-debt ratio of 4.07 outperforms 73.68% of its peers in the Healthcare Plans industry. This strong financial standing, coupled with a GuruFocus financial strength rank of 8 out of 10, underscores Molina Healthcare's solid financial foundation.
Profitability and Growth Prospects
Profitable companies with a track record of consistent earnings are generally less risky investments. Molina Healthcare has maintained profitability for 9 out of the past 10 years. With a revenue of $33.20 billion and an EPS of $16.04, its operating margin of 4.72% ranks well within the Healthcare Plans industry. The company's profitability rank of 8 out of 10 reflects its strong performance.
When it comes to growth, Molina Healthcare's average annual revenue growth of 27.8% surpasses 72.22% of its industry counterparts. Its 3-year average EBITDA growth rate of 8.8% also indicates a favorable growth trajectory compared to industry peers.
ROIC vs. WACC Analysis
An effective measure of a company's profitability is the comparison between its Return on Invested Capital (ROIC) and its Weighted Average Cost of Capital (WACC). Molina Healthcare's ROIC of 41.23 significantly exceeds its WACC of 8.18, indicating that the company is generating substantial value for its shareholders.
Final Thoughts on Molina Healthcare's Valuation
In summary, Molina Healthcare appears to be fairly valued at its current stock price. The company boasts strong financial health and profitability, with growth rates that outperform a significant portion of the Healthcare Plans industry. For a more detailed financial overview of Molina Healthcare, interested parties can review the company's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
