Trade-Ideas: Molina Healthcare (MOH) Is Today's Weak On High Relative Volume Stock

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.

Trade-Ideas LLC identified Molina Healthcare ( MOH) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Molina Healthcare as such a stock due to the following factors:

  • MOH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $37.5 million.
  • MOH has traded 93,867 shares today.
  • MOH is trading at 6.52 times the normal volume for the stock at this time of day.
  • MOH is trading at a new low 3.01% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on MOH:

Molina Healthcare, Inc. provides Medicaid-related solutions to meet the health care needs of low-income families and individuals; and to assist state agencies in their administration of the Medicaid program. The company operates through two segments, Health Plans and Molina Medicaid Solutions. MOH has a PE ratio of 217.5. Currently there are 4 analysts that rate Molina Healthcare a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Molina Healthcare has been 668,300 shares per day over the past 30 days. Molina Healthcare has a market cap of $2.2 billion and is part of the health care sector and health services industry. The stock has a beta of 2.06 and a short float of 20.6% with 9.47 days to cover. Shares are up 37.7% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Molina Healthcare as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 20.6%. Since the same quarter one year prior, revenues rose by 44.0%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.88, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.38, which illustrates the ability to avoid short-term cash problems.
  • Compared to its closing price of one year ago, MOH's share price has jumped by 36.08%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • 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. Compared to other companies in the Health Care Providers & Services industry and the overall market, MOLINA HEALTHCARE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for MOLINA HEALTHCARE INC is currently extremely low, coming in at 10.79%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.33% trails that of the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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