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Here's Why You Should Hold Magellan Stock in Your Portfolio
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Magellan Health, Inc. has been gaining momentum from intense focus on catering to behavioral health needs and enhanced specialty health services.
The company has a decent earnings surprise history. It has surpassed earnings estimates in three of the trailing four quarters and missed once. It has a trailing four-quarter earnings surprise of 40.79%, on average.
The expected long-term earnings growth rate is 18.1%, better than the industry’s average of 13.8%.
Magellan’s trailing 12-month return on equity (ROE) of 7.7% has been rising since the past three years. This highlights the company’s tactical utilization of shareholders’ funds.
Factors Driving Magellan
This Zacks Rank #3 (Hold) healthcare provider continues to benefit from strength in its behavioral health, specialty health and pharmacy businesses, which has enabled it to expand existing capabilities. It makes constant efforts to upgrade its specialty health services and even explore newer areas of this business.
Magellan has always been committed to catering to the behavioral health needs of people. Case in point, its healthcare business unit, Magellan Healthcare, partnered with Neuromotion in July through which specific Magellan members can avail — Mightier — an in-home digital platform for children.
The fact that Magellan has brought this platform for its members bodes well, particularly at a time when behavioral health issues have been rising alarmingly triggered by the COVID-19 pandemic.
Furthermore, the company’s divestiture of Magellan Complete Care (MCC) business to Molina Healthcare, Inc. (MOH - Free Report) , highlights its efforts to streamline business operations. The move bodes well as it is likely to provide enhanced capital flexibility. Improved capital position will enable Magellan to undertake investments for business growth.
It has to be noted that Magellan intends to assist payers in managing high healthcare costs and complex populations.
Further, the company has been undergoing transformation efforts, which are likely to result in lower operating costs and drive margins. To this effect, these efforts are expected to result in net savings of nearly $30 million by 2021 and reach nearly $75 million by 2022.
The solvency and capital position of this healthcare provider also appears strong. Its debt-to-capital ratio of 32% at second-quarter end is lower than the industry average of 38.2% and was also down from 32.8% as of Dec 31, 2019. It targets to keep net debt to EBITDA ratio of not more than 2x.
Shares of this healthcare provider have gained 22.7% in a year compared with the industry’s rally of 23.9%.
However, the company’s revenues have remained under pressure for quite some time, which remains a concern. Nevertheless, we believe that the company’s enhanced capabilities and strong nationwide presence are likely to drive revenues in the days ahead.
Select Medical and Humana surpassed earnings estimates in each of the trailing four quarters by 212.61% and 11.63%, on average, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Here's Why You Should Hold Magellan Stock in Your Portfolio
Magellan Health, Inc. has been gaining momentum from intense focus on catering to behavioral health needs and enhanced specialty health services.
The company has a decent earnings surprise history. It has surpassed earnings estimates in three of the trailing four quarters and missed once. It has a trailing four-quarter earnings surprise of 40.79%, on average.
The expected long-term earnings growth rate is 18.1%, better than the industry’s average of 13.8%.
Magellan’s trailing 12-month return on equity (ROE) of 7.7% has been rising since the past three years. This highlights the company’s tactical utilization of shareholders’ funds.
Factors Driving Magellan
This Zacks Rank #3 (Hold) healthcare provider continues to benefit from strength in its behavioral health, specialty health and pharmacy businesses, which has enabled it to expand existing capabilities. It makes constant efforts to upgrade its specialty health services and even explore newer areas of this business.
Magellan has always been committed to catering to the behavioral health needs of people. Case in point, its healthcare business unit, Magellan Healthcare, partnered with Neuromotion in July through which specific Magellan members can avail — Mightier — an in-home digital platform for children.
The fact that Magellan has brought this platform for its members bodes well, particularly at a time when behavioral health issues have been rising alarmingly triggered by the COVID-19 pandemic.
Furthermore, the company’s divestiture of Magellan Complete Care (MCC) business to Molina Healthcare, Inc. (MOH - Free Report) , highlights its efforts to streamline business operations. The move bodes well as it is likely to provide enhanced capital flexibility. Improved capital position will enable Magellan to undertake investments for business growth.
It has to be noted that Magellan intends to assist payers in managing high healthcare costs and complex populations.
Further, the company has been undergoing transformation efforts, which are likely to result in lower operating costs and drive margins. To this effect, these efforts are expected to result in net savings of nearly $30 million by 2021 and reach nearly $75 million by 2022.
The solvency and capital position of this healthcare provider also appears strong. Its debt-to-capital ratio of 32% at second-quarter end is lower than the industry average of 38.2% and was also down from 32.8% as of Dec 31, 2019. It targets to keep net debt to EBITDA ratio of not more than 2x.
Shares of this healthcare provider have gained 22.7% in a year compared with the industry’s rally of 23.9%.
However, the company’s revenues have remained under pressure for quite some time, which remains a concern. Nevertheless, we believe that the company’s enhanced capabilities and strong nationwide presence are likely to drive revenues in the days ahead.
Stocks to Consider
Some better-ranked stocks in the same space are Select Medical Holdings Corporation (SEM - Free Report) and Humana Inc. (HUM - Free Report) . While Select Medical sports a Zacks Rank #1 (Strong Buy), Humana carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Select Medical and Humana surpassed earnings estimates in each of the trailing four quarters by 212.61% and 11.63%, on average, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>