Healthcare Stocks: Molina Healthcare (MOH)
Molina Healthcare (MOH) is an insurance payor focused on the Medicaid niche — it covers an estimates 2 million patients in 11 states.
MOH has a big opportunity now because the Affordable Care Act was written to expand state Medicaid programs to individuals with incomes at or below the federal poverty level — $16,000 for an individual; nearly $33,000 for a family of four. Although the Supreme Court ruled that states could opt out of expanding their Medicaid programs, 26 states and the District of Columbia have elected to expand — and other states are under pressure to reconsider.
Although Medicaid has far slimmer margins than other business lines, MOH has the expertise to gain volume as enrollees grow. It also has a strong Medicaid franchise in two key states: California and Washington. MOH has a price to earnings growth (PEG) ratio of only 0.8, suggesting that the stock could be undervalued. It also has a forward P/E of 14, lower than many other healthcare stocks.