Molina Healthcare, Inc. (MOH): A Bull Case Theory

We came across a bullish thesis on Molina Healthcare, Inc. on Sherwood Investment Letter’s Substack by Joel Sherwood. In this article, we will summarize the bulls’ thesis on MOH. Molina Healthcare, Inc.'s share was trading at $214.61 as of July 15^th. MOH’s trailing and forward P/E were 10.37 and 9.23, respectively according to Yahoo Finance.

Molina Healthcare (MOH), trading around $230 per share, has emerged as a compelling contrarian play in today’s buoyant but increasingly expensive market. Amid all-time market highs and a lack of clear value opportunities globally, the weakening U.S. dollar and the underperformance of the U.S. healthcare sector stand out as notable trends.

For international investors, especially those buying with stronger currencies like the Swedish krona, the dollar’s 10% year-on-year decline enhances U.S. purchasing power. More crucially, healthcare stocks—unlike the surging tech sector—have broadly declined, with key players like UnitedHealth, Humana, and Centene dropping sharply.

Molina was pulled down with them, including a 20% one-day plunge following a Centene profit warning. While such swings often reflect panic rather than fundamentals, Molina’s numbers tell a different story. The company boasts stellar returns on invested capital—42% over five years—alongside strong valuation metrics: trailing and forward P/E of 11 and 10, EV/EBIT of 7, and an ongoing buyback program.

Despite modest margins and a lack of founder-led leadership, Molina’s balance sheet remains robust, with a debt/equity ratio of 0.9 and an EV significantly below its market cap. Notably, in early April’s tariff-driven market pullback, Molina rose sharply, highlighting its defensive traits. With healthcare demand being structurally perpetual and Molina focusing on low-income patient care, its long-term durability is appealing.

The recent sell-off appears to be a manic overreaction, creating an entry point for those seeking value and downside protection. As markets peak and corrections loom, Molina could offer both safety and upside in an unpopular but essential sector.

Previously, we covered a bullish thesis on Molina Healthcare, Inc. (MOH) by Traditional-Jump6145 in October 2024, which highlighted the company’s growth in Medicaid and Medicare and strong earnings potential. The company's stock price has depreciated by approximately 26% since our coverage. The thesis still stands as long-term fundamentals remain strong. Joel Sherwood shares a similar view but emphasizes on recent market overreaction.

Molina Healthcare, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held MOH at the end of the first quarter which was 48 in the previous quarter. While we acknowledge the potential of MOH as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None.