Medical Specialities company Molina Healthcare is taking Wall Street by surprise today, falling to $281.61 and marking a -8.0% change compared to the S&P 500, which moved -0.0%. MOH is -15.51% below its average analyst target price of $333.31, which implies there is more upside for the stock.
As such, the average analyst rates it at buy. Over the last year, Molina Healthcare has underperfomed the S&P 500 by -41.3%, moving -23.8%.
Molina Healthcare, Inc. provides managed healthcare services to low-income families and individuals under the Medicaid and Medicare programs and through the state insurance marketplaces. The company is categorized within the healthcare sector. The catalysts that drive valuations in this sector are complex. From demographics, regulations, scientific breakthroughs, to the emergence of new diseases, healthcare companies see their prices swing on the basis of a variety of factors.
Molina Healthcare's trailing 12 month P/E ratio is 13.8, based on its trailing EPS of $20.41. The company has a forward P/E ratio of 9.9 according to its forward EPS of $25.71 -- which is an estimate of what its earnings will look like in the next quarter. The P/E ratio is the company's share price divided by its earnings per share. In other words, it represents how much investors are willing to spend for each dollar of the company's earnings (revenues minus the cost of goods sold, taxes, and overhead). As of the third quarter of 2024, the health care sector has an average P/E ratio of 26.07, and the average for the S&P 500 is 29.3.
When we subtract capital expenditures from operating cash flows, we are left with the company's free cash flow, which for Molina Healthcare was $1.58 Billion as of its last annual report. This represents the amount of money that is available for reinvesting in the business, or for paying out to investors in the form of a dividend. With its strong cash flows, MOH is in a position to do either -- which can encourage more investors to place their capital in the company. Over the last four years, the company's free cash flow has been growing at a rate of 149.0% and has on average been $1.03 Billion.
Another valuation metric for analyzing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present liquidation value of the company, as if it sold all of its assets and paid off all debts). Molina healthcare's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 3.51, but is still below the average P/B ratio of the Health Care sector, which stood at 3.53 as of the third quarter of 2024.
Molina Healthcare is likely fairly valued at today's prices because it has a Very low P/E ratio, an average P/B ratio, and generally positive cash flows with an upwards trend. The stock has strong growth indicators because of its decent operating margins with a stable trend, and an average PEG ratio. We hope this preliminary analysis will encourage you to do your own research into MOH's fundamental values -- especially their trends over the last few years, which provide the clearest picture of the company's valuation.
