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Managing the healthcare needs of those dependent on government programs requires expertise on both the medical and regulatory sides of the equation. There is an outfit in Long Beach, California that handles the demands well enough to put up some solid financial numbers.
Molina Healthcare (NYSE: MOH) is a multi-state managed care organization that arranges for the delivery of healthcare services to persons eligible for Medicaid and other government-sponsored programs for low-income families and individuals. The firm has more than a million members in California, Michigan, New Mexico, Ohio, Texas, Utah and Washington. It also offers preventive health education, disease management and pharmacy management services. As well, it operates about twenty primary care clinics in California.
The company pleased investors last week, when it raised its earnings outlook for fiscal 2007. Management now sees EPS of $1.85-1.95, up from a prior forecast of $1.75-1.90. Analysts had been expecting $1.87.
The news popped the shares out of a late August/early September "cup" into the mid-September "handle" of a Cup & Handle formation. Now, the price is showing signs of completing the pattern with a bullish rise from the right-hand side of the "handle".
Brokers recommend the issue with ten "holds" and one "sell". Analysts see a 19% growth rate, through the next year. The MOH Price to Sales ratio (0.46), Price to Book ratio (2.18), Price to Free Cash Flow ratio (7.96), Sales Growth rate (26.67%) and Revenue per Employee ($1.12M) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 54% of the outstanding shares. Over the past 52 weeks, the stock has traded between $28.15 and $41.25. A stop-loss of $31.40 looks good here. Note that the firm is expected to announce Q3 results in early November.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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