Molina Healthcare, Inc.Full report →1 / 14
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Molina Healthcare, Inc.

Molina Healthcare runs government-funded Medicaid, Medicare, and ACA marketplace health plans for about 5.5 million low-income and elderly Americans, keeping the thin spread between fixed state premiums and the medical claims it pays.

The shares topped $419 in March 2024, fell below $123 by February 2026 as the medical margin broke, then recovered to about $225 by mid-July 2026.
$224.82
Share price (Jul 16 2026)
$11.5B
Market cap
$45.4B
FY2025 revenue
91.7%
FY2025 medical care ratio
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As reported

Revenue tripled to $45 billion; profit round-tripped below its 2020 level

FY2020 → FY2025as reported · $
Revenue$45.4B+12%
Operating margin1.7%−2.5pp
Net income$472M−60%
EPS$8.92−56%
Free cash flow−$636M−$1.2B
Open the full statements →
Revenue, margins, net income, EPS and free cash flow as filed, FY2020–FY2025.
  • Growth by acquisition, not membership. Revenue climbed from $19.4B in 2020 to $45.4B in 2025 while membership rose only from about 4.0M to 5.5M — the gains came from contract wins, acquisitions, and rate increases.
  • A profit round-trip. Net income built toward $1.18B by 2024, then fell to $472M in 2025 — below the $673M earned in 2020 on less than half the revenue — as the medical care ratio jumped to 91.7%.
  • Cash that swings. Operating cash flow ranged from a $2.1B inflow to a $535M outflow across 2020–2025, driven by government-payment timing rather than capital spending, which never tops about $101M a year.
Margin reset

Management re-based its own targets — a structural step-down, not a passing dislocation

Adjusted diluted EPS: actual, guide, target ($)
The 2026 floor is guided; the $25 target for 2029 sits only modestly above 2024's $22.65.
  • The level it caps. At the re-based 2–3% pre-tax margin, normalized adjusted EPS on today's revenue is roughly $16.80, against the $22.65 the old 4–5% margin produced in 2024 — the re-basing, not the 2026 trough, sets the lower normalized level.
  • The recovery it does not cap. Management's bridge from a 2026 floor of at least $5.00 to a $25.00 target in 2029 says it 'requires only a modest improvement in the Medicaid rate and trend imbalance' — the lower margin caps the level, not the recovery.
Between November 2024 and May 2026 Molina raised its long-term consolidated medical-care-ratio target by roughly 350 basis points (from 87.5-88.5% to 91-92%) and roughly halved its adjusted pre-tax margin target (from 4-5% to 2-3%); on February 4, 2026 it amended its credit agreement to cut the minimum interest-coverage covenant from 3.0x to 1.75x for 2026; and between July 2025 and February 2026 it cut its 2026 premium target from about $46 billion to roughly $42 billion — below the $43.05 billion it earned in 2025 — three separate, dated actions that each presume the earnings pressure endures rather than reverses.
What the price pays

At $224.82 the price underwrites a recovery the company's own pay committee doubts

P/E ladder at $224.82
Earnings basisAdj. EPSP/E
2026 guide (≥$5.00)$5.1643.6x
2027 consensus$8.3427.0x
2025 actual$11.0320.4x
Normalized on today's revenue$16.8013.4x
2029 management target$25.009.0x
The 9x rests entirely on the 2029 $25 target; 13x is the multiple on flat, normalized earnings.
  • The cross-check in numbers. The 9x rests entirely on the 2029 $25 target; the company's own $32 FY2027 incentive bar — set above it — is 'extremely unlikely' on the committee's own view, so its internal odds doubt the recovery the price underwrites through 2027.
  • The other side. The $25 target is only about a 2% annual rate above the $22.65 earned in 2024 — a level with a track record — and Q1 2026 consolidated MCR of 91.1% printed below the guided path.
At $224.82 the market pays about 9x Molina's 2029 target of $25 adjusted EPS (versus about 20x its 2025 adjusted earnings), so the buyer is underwriting the earnings recovery — yet Molina's own compensation committee forfeited the 2023 three-year performance units on cumulative adjusted EPS of $54.56 against a $59.36 threshold, marked the 2024 and 2025 units to zero as 'not probable,' and judged the FY2027 special-grant threshold of $32 adjusted EPS 'extremely unlikely' — a candid internal view that the multi-year recovery embedded in the price is unlikely to clear even threshold levels through 2027.
The business

A pure-play aggregator of government health plans, three-quarters Medicaid

FY2025 revenue by segment
Roughly three of every four premium dollars come from state Medicaid contracts.
  • Governments are the customer. Molina contracts with state Medicaid agencies, federal Medicare, and the ACA marketplaces to cover about 5.5 million low-income and elderly members across 21 states — it sells nothing directly to consumers.
  • A rate-taker's economics. States set a fixed per-member premium and Molina bears the medical cost risk, so the margin is most sensitive to one ratio: the share of each premium dollar paid out as claims, 91.7% in 2025.
  • Thin by design. The model turns about $45B of revenue into roughly $0.5B of net profit; the returns come from scale and cost control, not pricing power.
Revenue durability

Revenue is won in state RFPs, not held by a moat

Premium revenue: actual, guide, target ($B)
2026 premium is guided below 2025 — a rare year-on-year decline — against a $64B target for 2029.
  • No customer lock-in. Medicaid contracts run three to five years and go out to competitive bid; four states — California, New York, Texas, Washington — supply 54% of Medicaid premium, so one lost rebid could remove a tenth of the book.
  • A decade of winning. Molina has retained reprocurements and won new states across many cycles, most recently a roughly $6B Florida award; the ten-year revenue case rests on that track record, not on switching costs.
  • The pie can shrink. Federal work requirements and expired ACA subsidies push 2026 premium below 2025 — durability here is more exposed to policy than to competition.
Cash and capital

The cash is real over the cycle, but it does not arrive smoothly

Operating cash flow vs net income ($M)
2025 brought the first operating-cash outflow since 2018, on government-payment timing.
  • Cumulatively sound. Over 2020–2025 Molina turned $4.87B of net income into $6.56B of operating cash — a 1.35x conversion, consistent with collecting premium before paying claims.
  • But wavering. Operating cash printed below net income in three of the last four years and swung to a $535M outflow in 2025 — the volatility a consistency-focused investor dislikes.
  • Net cash is a mirage. The $8.6B consolidated cash pile mostly sits as ~$3.1B of locked statutory capital; the parent that owns the equity carries roughly $3.5B of net debt.
Return on capital

A capital-light compounder — until the spread that powers it broke

Return on equity vs return on assets (%)
ROE ran in the mid-20s to high-30s on almost no capital, then halved in 2025.
  • Float does the work. Molina runs about $45B of revenue on roughly $4B of equity; premium collected before claims are paid funds the assets, so a thin margin geared by float lands as a high return on equity.
  • Set by a spread. The 2025 halving of ROE — from 26% to 12% — came almost entirely from net margin falling from 2.9% to 1.0% as the medical care ratio rose; turnover and leverage barely moved.
  • Earned without a moat. Those returns come from a low-cost position that states can compete away through rate-setting, not from protection — which is why they unwind fast.
Capital return

Large buybacks, imperfectly timed into the decline

Buyback average cost vs the subsequent low ($/share)
The first $500M tranche bought near $298, months before the stock reached $123.
  • Real scale. With no dividend, Molina returned $1.0B through repurchases in each of 2024 and 2025, taking the share count from about 58M toward 51M.
  • Poor timing. Half of 2025's spend went out in Q1 at $297.83 — exhausting an authorization just before the collapse — the rest in Q3 at $175.50; the Q1 shares were underwater within months.
  • Capacity is tight. About $500M remains authorized through 2026, but the parent holds only ~$205M of cash, so further buybacks lean on ~$1B a year of subsidiary dividends; none were made in Q4 2025 at the lows.
Positioning

Liquid and optionable, but the recovery is richly priced and unaccompanied

~50%
Implied volatility (120-day)
$240M
Avg daily volume
$210.76
Mean analyst targetabout 6% below the $224.82 price
2018
Last open-market insider buy
  • Ownable with defined risk. The NYSE shares trade about $240M a day and listed options run to January 2028, so the view can be held over a year — but implied volatility near 50%, roughly double a stable insurer's, makes that optionality expensive.
  • No one is confirming the bottom. No insider has bought in the open market since 2018, the buyback paused in Q4 2025 at the lows, and 15 of 19 analysts rate the stock a hold with a target below the price.
  • Volatility, not resolution. The options market prices continued large moves, reflecting the same question the margin work leaves open: whether 2025 was a step-change or a dislocation.
Management and pay

The 2017 turnaround CEO is back, with pay that has gone to zero

CEO compensation actually paid ($M)
Marked to the share price each year, realized CEO pay turned negative in 2025.
  • A proven operator. Joseph Zubretsky led Molina out of a deeper 2017 crisis — a $9.07 per-share loss that cost the founding family their jobs — and built the five-year revenue tripling; the 2025 squeeze runs on rates he does not set.
  • Alignment, not cosmetics. The 2025 cash bonus paid $0 of a $3.2M target, the 2023 three-year performance units were forfeited, and the 2024–2025 grants were marked to zero — three straight years of incentives at nothing.
  • A loosened tether. The special grant meant to hold a retirement-eligible CEO through 2027 is now expected to vest at $0, and the 2025 say-on-pay vote failed after years above 90% support.
The drawdown

A top-decile compounder that gave back five years in the margin break

Value of $100 invested end-2020
$100 in Molina became $80 by end-2025; the same $100 in the S&P 500 became $195.
  • Two acts. The line traces a top-decile compounder into 2023, then a round-trip that erased five years of relative performance in the 2024–2025 margin break.
  • Fallen, not expensive. The equity dropped from a March 2024 peak near $24B to about $6.3B at the February 2026 low — an ~74% drawdown — before recovering to about $11.5B.
  • The gap the buyer weighs. Management's stated 2029 EPS target barely moved from 2024, so if it is credible the value fell far less than the price; if the re-basing is structural, part of the drawdown should not reverse.
Where it sits

Priced for a partial recovery, with the first data point on the bull's side

Adjusted EPS the price leans on ($/share)
At $224.82 the stock is ~9x the 2029 target and ~13x a normalized result on today's revenue.
  • The bridge that doesn't need 88% back. The $5-to-$25 climb leans on the Florida ramp, the MAPD exit, and operating leverage — contractual, self-help rungs — not on the medical margin returning to its old width.
  • The first step landed for the bull. Q1 2026 printed a 91.1% consolidated MCR below the guided path, positive $1.1B operating cash, and the acuity shift 'behind us' — one quarter, and management reaffirmed rather than raised.
  • What the price already discounts. At ~9x the target and ~13x a normalized result, partial delivery re-rates the stock and outright failure is largely priced; the margin-recovery rung is the least certain.
What to watch

Cheap against its own recovery target — if that recovery is more than the company's own pay committee will underwrite

Read the full report →

This distills a guided study of Molina built chapter by chapter — statements, revenue, margin, cash, capital returns, and what would decide the case.

Compiled from the full report · 2026-07-17 · For information, not investment advice.