One of the largest adjustments was $456 million due to asset write-downs. You can see all the adjustments made to MOH’s income statement here.īalance Sheet: I made $1.2 billion of adjustments to calculate invested capital with a net increase of $958 million. Income Statement: I made $280 million of adjustments, with a net effect of removing $120 million in non-operating expenses (1% of revenue). See the math behind this reverse DCF scenario.Ĭritical Details Found in Financial Filings by My Firm’s Robo-Analyst TechnologyĪs investors focus more on fundamental research, research automation technology is needed to analyze all the critical financial details in financial filings as shown in the Harvard Business School and MIT Sloan paper, "Core Earnings: New Data and Evidence”.īelow are specifics on the adjustments I make based on Robo-Analyst findings in Molina Healthcare’s 2018 10-K: If MOH can maintain its 2018 NOPAT margin of 4% (compared to 5% TTM) and grow NOPAT by 6% compounded annually (less than half the NOPAT CAGR of 13% from 2009 to 2017) for the next decade, the stock is worth $295/share today – a 123% upside. This expectation seems overly pessimistic for a firm that has grown NOPAT by 36% compounded annually over the past decade. This ratio means the market expects MOH’s NOPAT to permanently decline by 30%. At its current price of $132/share, MOH has a price-to-economic book value (PEBV) ratio of 0.7.
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