Molina Healthcare: A Hidden Gem in the Healthcare Industry
Michael Burry, the famous investor known for predicting the housing market crash in “The Big Short,” has recently made headlines for his significant investment in Molina Healthcare (MOH). This investment highlights the impressive growth rates and undervalued stock of this healthcare company.
Impressive Growth Rates
Molina Healthcare is a managed healthcare company that provides services to individuals covered by Medicaid, Medicare, and the Children’s Health Insurance Program (CHIP). The company has seen substantial growth in both revenue and earnings per share (EPS).
- Revenue grew from $4.4 billion in 2016 to $7.7 billion in 2020, representing a compound annual growth rate (CAGR) of 13.3%.
- EPS grew from $1.30 in 2016 to $4.70 in 2020, representing a CAGR of 23.3%.
Undervalued Stock
Despite these impressive growth rates, Molina Healthcare’s stock is currently trading at a relatively low price-to-earnings (P/E) ratio of 12x forward earnings and below 7x forward EBITDA. This undervaluation presents an attractive opportunity for investors.
Challenges Ahead
However, Molina Healthcare is not without its challenges. One major concern is the decline in Medicaid membership, which accounts for the majority of the company’s revenue. This decline is due in part to the economic recovery and the expansion of Medicaid eligibility under the Affordable Care Act (ACA) coming to an end in some states.
Another challenge is the high Medical Care Ratios, which represent the percentage of revenue spent on medical care versus administrative expenses. Molina Healthcare’s Medical Care Ratios have been increasing, which can put pressure on profitability.
Growth Strategies
To mitigate these challenges, Molina Healthcare is pursuing both organic growth and acquisitions. The company has a strong balance sheet and liquidity, with cash and cash equivalents totaling over $1 billion and no long-term debt.
Impact on Individuals
The investment by Michael Burry and the growth potential of Molina Healthcare may not have a direct impact on individuals, but it could potentially lead to improved healthcare services and access for those covered by Medicaid and other government healthcare programs.
Impact on the World
The growth of Molina Healthcare and other managed healthcare companies could have a significant impact on the healthcare industry as a whole. With an aging population and increasing healthcare costs, managed healthcare companies may play a crucial role in managing and containing costs while improving access to care.
Conclusion
Molina Healthcare’s impressive growth rates, undervalued stock, and pursuit of growth strategies make it an attractive investment opportunity. However, the challenges of declining Medicaid membership and increasing Medical Care Ratios cannot be ignored. As the healthcare industry continues to evolve, Molina Healthcare will be a company to watch.
Despite the potential impact on individuals and the world, it’s important to note that investing always comes with risks. As always, it’s recommended to consult with a financial advisor before making any investment decisions.
