MGLN Vs MOH: Which Health Insurance Stock Is Placed Better?

 | Jun 06, 2019 09:33PM ET

Health insurance industry has put up a robust performance over the years despite regulatory shackles. The industry’s revenues, profits and memberships have witnessed continued growth.

Growing Medicare and Medicaid business, owing to changing U.S. demography, should fuel demand for the products and services provided by the industry.

Against this backdrop, lets analyze Magellan Healthcare (NASDAQ:MGLN) and Molina Healthcare (NYSE:MOH) , both carrying a Zacks Rank #1 (Strong Buy) and with market capitalization of $1.58 billion and $9.6 billion, respectively. You can see .

Factors Driving the Health Insurance Industry

The most prominent factor driving growth for the players would be a changing U.S demography, which features growing baby boomer population, driving demand for Medicare Advantage (“MA”) plans, a substitute for Government sponsored Medicare plan for retirees.

Another attractive growth opportunity for the health insurers is Medicaid. This program has presented a solid growth opportunity over the past decade as states have continued to move toward managed care, in an effort to better manage rising costs and as a result of ACA-driven expansion. As many as 36 states have opted for Medicaid Expansion, with the remaining 14 having very low chances as they are under Republican control.

A strong balance sheet has allowed players to consolidate by acquiring companies. Recent mergers in the health insurance space have brought together health insurers and pharmacy benefit players. In-house PBM would allow health insurers to gain more control on drugs and thus management of medical costs.

Let's see how Molina Healthcare and Magellan Health are placed in the rapidly growing industry.

Price Performance

Both the companies have outperformed the industry (down 1.2%) so far this year. While shares of Molina Healthcare have gained 33.6%, Magellan Health has rallied 14.3%.

Other stocks in the industry WellCare Health Plans, Inc. (NYSE:WCG) and The Joint Corp. (NASDAQ:JYNT) have gained 21% and 94%, respectively, during the same time frame.