Magellan Health Inc Stock Downgraded (MGLN)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Magellan Health (Nasdaq: MGLN) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

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Highlights from the ratings report include:
  • MGLN's revenue growth trails the industry average of 20.5%. Since the same quarter one year prior, revenues slightly increased by 5.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • MGLN's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, MGLN has a quick ratio of 1.58, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Health Care Providers & Services industry and the overall market, MAGELLAN HEALTH INC's return on equity is below that of both the industry average and the S&P 500.
  • The gross profit margin for MAGELLAN HEALTH INC is currently extremely low, coming in at 4.22%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.56% trails that of the industry average.

Magellan Health, Inc. is engaged in the healthcare management business in the United States. Magellan Health has a market cap of $1.6 billion and is part of the health care sector and health services industry. Shares are down 7.2% year to date as of the close of trading on Friday.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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