BRAZIL - 2020/08/14: In this photo illustration the Molina Healthcare logo seen displayed on a ... [+]

 SOPA IMAGES/LIGHTROCKET VIA GETTY IMAGES

The stock price of Molina Healthcare, a managed care company best known for its health insurance through Medicaid and Medicare, reached its all-time high of $279 earlier this month, before a recent sell-off in health insurance stocks, led to an 11% fall in MOH stock to levels of around $248 currently. MOH stock is down 8% over the last five trading sessions. While the company raised its full-year guidance for revenue and earnings, there are concerns of rising Covid-19 related costs. The company benefited from lower medical costs in 2020, primarily due to fewer elective surgeries, but that trend has now reversed. With rising vaccination rates, there is a rise in the volume of elective surgeries, primarily due to a backlog that was created last year. This means health insurance companies will need to shell out more money to pay those bills. Molina’s MOH +2% medical costs as a percentage of premium income has risen to 88% in Q2 2021, compared to 82% in the prior year quarter, and it is likely to remain high in the near term.

Now, after an 8% fall in a week, will MOH stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent? According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for MOH stock average 8% in the next one-month (twenty-one trading days) period after experiencing an 8% drop over the previous week (five trading days). Also, the issue of high medical costs appears to be transient, and the company has raised its full-year outlook. As such, we believe that the MOH stock will likely rebound in the near term. But how would these numbers change if you are interested in holding MOH stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Molina Healthcare stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

MACHINE LEARNING ENGINE – try it yourself:

IF MOH stock moved by -5% over five trading days, THEN over the next twenty-one trading days MOH stock moves an average of 6%, with a 64% probability of a positive return over this period.

Some Fun Scenarios, FAQs & Making Sense of Molina Healthcare Stock Movements:

Question 1: Is the average return for Molina Healthcare stock higher after a drop?

Answer: Consider two situations,

Case 1: Molina Healthcare stock drops by -5% or more in a week

Case 2: Molina Healthcare stock rises by 5% or more in a week

Is the average return for Molina Healthcare stock higher over the subsequent month after Case 1 or Case 2?

MOH stock fares better after Case 1, with an average return of 6% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 1.3% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Molina Healthcare stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Molina Healthcare stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you - at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For MOH stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

Average Return

 TREFIS

You can try the engine to see what this table looks like for Molina Healthcare after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks - although MOH stock appears to be an exception to this general observation.

It’s pretty powerful to test the trend for yourself for Molina Healthcare stock by changing the inputs in the charts above.

While MOH stock may rise in the near term, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Cerner vs. Humana.