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 about 1.2 million members in California, Michigan, Missouri, Nevada, New Mexico, Ohio, Texas, Utah and Washington. It also offers preventive health education, disease management and pharmacy management services. As well, it operates nineteen primary care clinics in California.
Shareholders were pleased with the company's investor day presentations last week, when management highlighted potential positive catalysts for the year and maintained the firm's 2008 profit guidance. Deutsche Bank, Credit Suisse and Wachovia analysts subsequently issued favorable remarks about Molina's prospects. The guidance was termed "conservative" and confidence was expressed in the firm's ability to meet it. M&A growth opportunities were also mentioned.
The MOH
price popped on the news and then moved into a bullish "flag" pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with seven "holds" and three "underperforms". The MOH P/E ratio (13.34), PEG ratio (1.00), Price to Sales ratio (0.31), Price to Book ratio (1.64), Price to Free Cash Flow ratio (11.39), Sales Growth rate (30.93%), EPS Growth rate (35.29%), Return on Investment (9.84%) and Revenue per Employee ($1.16M) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 76% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $22.68 and $44.94. A stop-loss of $24.90 looks good here. Note that the firm is next expected to release quarterly results in late July.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.
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