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As part of our ongoing series here at The Acquirer’s Multiple, each week we spotlight a stock from our Stock Screeners that might be a deeply undervalued gem hiding in plain sight.

This week’s spotlight:

Molina Healthcare Inc (MOH)

Molina is a managed care organization providing health insurance to low-income families and individuals under government-sponsored programs like Medicaid and Medicare. With a growing footprint and consistent profitability, MOH has quietly become one of the more compelling compounders in the healthcare space.

What is IV/P (Intrinsic Value to Price)?

IV/P tells you whether a stock offers more intrinsic value than the price you’re paying.

• IV/P > 1 → stock may be undervalued
• IV/P < 1 → stock may be overvalued

MOH IV/P: 1.40

With an IV/P of 1.40, Molina’s current valuation implies investors are paying just $1 for what may be $1.40 worth of intrinsic value. That 40% margin of safety hints at meaningful long-term upside for patient investors.

Supporting Metrics

• Free Cash Flow (TTM): $427 million

• Market Cap (approx.): ~$8.6 billion

• Free Cash Flow Yield: ~4.96%

Molina generated $427 million in free cash flow over the trailing twelve months. With a market capitalization of around $8.6 billion, that translates to a Free Cash Flow Yield of nearly 5% — a solid figure for a defensive, recession-resistant healthcare company.

Acquirer’s Multiple: 4.50

The Acquirer’s Multiple — which measures Enterprise Value / Operating Earnings — stands at 4.50. This suggests investors are paying just $4.50 for every $1 of operating income, a striking figure for a consistently profitable business in a non-cyclical sector.

Revenue & Profitability

• Revenue (TTM): $43.4B
• Operating Income (TTM): $1.65B
• Net Income (TTM): $1.13B
• Net Margin: ~2.6%
• Operating Margin: ~3.8%
• Return on Equity (2024): ~25.1%

While margins are tight — typical for managed care — Molina’s scale and cost control allow it to generate impressive returns on equity and healthy bottom-line profitability.

Capital Allocation

• Repurchase of Stock (TTM): $1.5B
• Debt Reduction: $500M
• Cash on Balance Sheet: $4.59B
• Total Debt: $3.12B

Molina has used excess cash flow to aggressively repurchase shares and reduce debt — a shareholder-friendly strategy that enhances per-share value and lowers leverage.

Why Might MOH Be Undervalued?

1. Healthcare Complexity Discount
Investors may be underestimating Molina’s durable moat in government-backed healthcare due to the perceived regulatory and margin complexities.

2. Consistent Execution
Despite macro pressures, Molina continues to grow revenue, generate cash, and return capital — all while expanding operating leverage.

3. Buyback-Driven Value Creation
A $1.5B buyback program — over 15% of market cap — combined with debt reduction, signals confident management and disciplined capital allocation.

Conclusion

With an Acquirer’s Multiple of just 4.50, IV/P of 1.40, a rising free cash flow yield, and disciplined buybacks, Molina Healthcare (MOH) looks like an undervalued compounder hiding in plain sight. For investors seeking a stable, cash-generative healthcare name with multiple levers for long-term value creation, MOH may be well worth a closer look.

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